Logan Products

Logan Products computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year, it estimated that 42,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $505,000 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $3.00 per direct labor-hour. Logan's actual manufacturing overhead for the year was $710,762 and its actual total direct labor was 42,500 hours.

Required:

Compute the company's predetermined overhead rate for the year

In addition to overfill, the manufacturing engineers expect to incur a 3% loss of raw materials during the making phase of production. In order to make a direct material cost, should I add this 3% into each material(s) used in production ?

Sales Projections

Over the past 12 months the corporation has been evaluating the product under the brand name Pop’s Cola in a Denver test market. Lacking any specific pricing expertise the company matched the on-shelf pricing of Coke and Pepsi, and determined the following sales estimates.

Sales Projection estimated Sales per year

Pops 12 pack (355 ml/12 cans) 100,000,000 Cases

Pops 2 liter 200,000,000Bottles
 

Raw material costs Pop's top secret formula

Ingredient % in Formula Cost per Liter of ingredients in $$$

Carbonated Water 73% 0,08

High Fructose Corn Syrup 11,20% 0,49

Sugas 6,30% 0,37

Carmel Color 3% 1,4

Phosphoric Acid 2,70% 0,1

Caffeine 2,10% 0,12

Citric Acid 1,10% 0,15

Cola Flavor 0,60% 4,11 

Based on a conversation with the engineering staff the 355-ml cans need to be filled at 357 ml to avoid under-pack, while 2 Liter bottles need to be filled at 2.008 Liters per bottle. In addition to overfill, the manufacturing engineers expect to incur a 3% loss of raw materials during the making phase of production. 

Based on my calculation, to determin a raw direct material cost per unit Can, my calculation is : Fluid material in each Can, cost : $ 0,0788 (assume 375 ml) 

Back to my question : To make the material fulfilled the can precisely, should I embedded this 3% potential loss by ordering more materials 3% or adding 3% of the 375 miliiter materials.... Or should I just ignore this 3% in my calculation ?  

 
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