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Predetermined Overhead Rate

Question Description

Problem 4-32 (Part Level Submission)

Bramble Wings, Inc. manufactures airplanes for use in stunt shows. Bramble’s factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its shape, weight, and color), Bramble uses a job order costing system to accumulate product costs.

At the end of 2016, Bramble’s accountants developed the following expectations for 2017 based on the marketing department’s sales forecast:

Budgeted overhead cost $1,118,000
Estimated machine hours 44,000
Estimated direct labor hours 8,000
Estimated direct materials cost $1,510,000

Bramble’s inventory count, completed on December 31, 2016, revealed the following ending inventory balances:

Raw Materials Inventory $249,000
Work in Process Inventory $626,000
Finished Goods Inventory $730,000

The company’s 2017 payroll data revealed the following actual payroll costs for the year:

Job Title Number
Employed
Wage Rate
per Hour
Annual
Salary per
Employee
Total Hours
Worked per
Employee
President and CEO 1 $224,000
Vice president and CFO 1 $177,000
Factory manager 1 $40,700
Assistant factory manager 1 $32,700
Machine operator 5 $14.5 2,250
Security guard, factory 2 $20,900
Forklift operator 2 $7.5 2,000
Corporate secretary 1 $35,300
Janitor, factory 2 $6 2,150

The following information was taken from Bramble’s Schedule of Plant Assets. All assets are depreciated using the straight-line method.

Plant Asset Purchase Price Salvage Value Useful Life
Factory building $4,000,000 $150,000 20 Years
Administrative office $650,000 $125,000 30 Years
Factory equipment $2,000,000 $20,000 12 Years

Other miscellaneous costs for 2017 all paid in cash included:

Cost Amount
Factory insurance (fully expired) $13,800
Administrative office utilities $5,200
Factory utilities $31,900
Office supplies (fully consumed) $4,500

Additional information about Bramble’s operations in 2017 includes the following:

Raw materials purchases for the year amounted to $1,949,000. All materials were purchased on account.
The company used $1,870,000 in raw materials during the year. Of that amount, 85% was direct materials and 15% was indirect materials.
Bramble applied overhead to Work in Process Inventory based on direct materials cost.
Airplanes costing $3,450,000 to manufacture were completed and transferred out of Work in Process Inventory.
Bramble uses a markup of 80% to price its airplanes. Sales for the year were $6,570,000. All sales are made on account.
(Note: This transaction requires two journal entries.)

Collapse question part

(a)

What was Bramble’s predetermined overhead rate in 2017? (Round answer to 2 decimal places, e.g. 52.75%.)

Predetermined overhead rate % of direct materials cost

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