Hello Marlon & Bradley,
Direct labor is the cost driver should be used to allocate
only variable manufacturing OH (Exclude all fixed costs)
Var. MOH = $625 (Supplies) + $1,500 (Indirect labor) + $125 (Power) = $2,250 (Recent year income statement)
Var. MOH driver rate = $2,250 / $7,500 = $0.30 per $1 DL (Or 30%)
Estimated Variable MOH for new job order = $56,000 x 30% = $16,800
Total variable manufacturing cost = $29,000 (DM) + $56,000 (DL) + $16,800 (DOH) = $102,000
Total incremental cost = $102,000 / (1 - 0.1) = $113,333
Please accept my apologies, I intended to repeat the calculation in this way to give other students more clarity & explanation.
Kind regards
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Samer Ahmad, FMVA, SCA
Kuwait
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Original Message:
Sent: 04-01-2020 02:28 AM
From: Marlon Laguador
Subject: Pricing Help
Hi Bradley
Estimated Direct Materials 29200
Est Direct Labor 56000
Est Variable MOH 16800 (60% of 28000)
MOH - Variable 2250
MOH-Fixed 1500
Total 3750
2250/3750= 60%
Original Message------
Can someone explain to me where the $102,000 Variable MOH comes from?
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Bradley Kilbreth
Student
Manchester NH
United States
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