O’hara Corporation

O’hara Corporation estimated its overhead cost would be $24,000 per month except for
January when it pays the $72,000 annual insurance premium on the manufacturing
facility. Accordingly, the January overhead costs were expected to be $96,000 ($72,000+
$24,000). The company expected to use $7,000 direct labor hours per month expect
during july, august and September when the company expected 9,000 hours of direct
labor each month to build inventories for high demand that normally occurs during the
holiday season. The company’s actual direct labor hours were the same as the estimated
hours. The company made 3,500 units of product in each month except july, august and
September in which it produced 4,500 units each month. Direct labor cost were $24 per
unit, and the direct materials costs were $10 per unit

a.calculate the predetermined overhead rate based on direct labor hours.
b.Determine the total allocated overhead cost for January, march and august.
c.Determine the cost per unit of product for January march and august.
d.Determine the selling price for the product assuming that company desires to earn
a gross margin of $20 per unit