queen dairy determined the total predetermined OH rate for costing purposes is 26.80 per animal/day. Of this 25.20 is the variable portion. Overhead cost information for 2 levels of activity within relevant range:
- 4000 animal days 6000 animal days
- indirect materials 25,600 38,400
- indirect labor 56,000 80,000
- maintenance 10,400 13,600
- utilities 8,000 12,000
- all other 15,200 21,600
a. Determine fixed and variable values for each of the overhead items, and determine the total overhead cost formula.
b. Assume the total predetermined OH is based on expected annual capacity. What is the level of activity for the company?
c. Determine expected overhead costs at the expected annual capacity.
d. If the company raises its expected capacity by 3000 animal days above the present level, calculate a new total overhead rate for product costing.