Carol Ellen is the cost accountant for CC Candy Manufacturers. For the current year, Carol expects to incur a total of $768,420 in manufacturing overhead costs and $465,710 in direct labor costs. CC Candy's variable overhead rate has been 80% of direct labor cost, and that rate is not expected to change. The standard direct labor cost per pound of candy is $5.60. What is CC Candy's standard fixed overhead cost per pound of candy?

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19 July, 06:43

Carol Ellen is the cost accountant for CC Candy Manufacturers. For the current year, Carol expects to incur a total of $768,420 in manufacturing overhead costs and $465,710 in direct labor costs. CC Candy's variable overhead rate has been 80% of direct labor cost, and that rate is not expected to change. The standard direct labor cost per pound of candy is $5.60. What is CC Candy's standard fixed overhead cost per pound of candy?

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Cooley · Answer 1

predetermined overhead per pound of finished product $4.48

Explanation:

Despite the fact suggesting otherwise; we are told Candy's management will stick to a 80% of direct labor predetermined overhead rate:

if a pound of finished product has a direcrt labor of $5.60 then the factory overhead is:

cost driver x predetermined rate

$5.60 direct labor x 80%

5.6 x 0.8 = 4.48