O’hara Corporation estimated its overhead cost would be $24,000 per month except for January when it pays the $72,000 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $96,000 ($72,000+ $24,000). The company expected to use $7,000 direct labor hours per month expect during july, august and September when the company expected 9,000 hours of direct labor each month to build inventories for high demand that normally occurs during the holiday season. The company’s actual direct labor hours were the same as the estimated hours. The company made 3,500 units of product in each month except july, august and
September in which it produced 4,500 units each month. Direct labor cost were $24 per unit, and the direct materials costs were $10 per unit
Required
a.calculate the predetermined overhead rate based on direct labor hours.
b.Determine the total allocated overhead cost for January, march and august.
c.Determine the selling price for the product assuming that company desires to earn
d.a gross margin of $20 per unit
