Parker & Co. expects overhead costs of $400,000 per year and direct production c

Question

Parker & Co. expects overhead costs of $400,000 per year and direct production costs of $12 per unit. The estimated production activity for the 2012 accounting period is as follows: The predetermined overhead rate based on units produced is (rounded to the nearest penny). $0.75 per unit. $9.00 per unit. $34.80 per unit. $10.00 per unit. Ted Mission Company wishes to allocate rent expense of $24,000 to its three operating departments. Departments 1, 2, and 3 occupy 10,000, 20,000 and 30,000 square feet, respectively. Based on this information, the amount of rent expense to be allocated to Department 3 is $8,000. True or False

Explanation / Answer

1 Parker & Co Details Q1 Q2 Q3 Q4 Total Units Produced                  11,500                    9,000                    8,250           11,250      40,000 m Total Estimated production for the year                  40,000 n Total estimated Overhead cost of year                400,000 Predermined Overhead rate per unit produced =n/m=                          10 Answer D. is correct 2 Ted Mission company Details Department 1 Department 2 Department 3 Total Square Footage                  10,000                  20,000                  30,000           60,000 % share of squae footage 16.67% 33.33% 50.00% Rent Expense (24000) allocation                    4,000                    8,000                  12,000           24,000 So the statement that rent allocated to department 3 is 8000 is False

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