to continue with the preceding example henderson industrial decides to stop recordin 635730

To continue with the preceding example, Henderson Industrial decides to stop recording normal spoilage in its bills of material, and instead records the actual cost of spoilage in a manufacturing overhead cost pool. It calculates this cost by adding up the number of spoiled cartons and multiplying by the component cost of each one. In May, the calculation is:

1,500 spoiled cartons x $0.25/unit resin cost = $375

Henderson’s cost accountant includes this cost in the manufacturing overhead cost pool, which is comprised of the following costs in May:

During May, Henderson manufactured 10,000,000 cartons. The amount of the overhead cost pool allocated to each carton is:

$205,375 / 10,000,000 cartons = $0.021 per carton