Big Trail Running Company has started to produce running apparel in addition to
ID: 2342275 • Letter: B
Question
Big Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:
Machining Department
Finishing Department
Estimated Manufacturing Overhead by Department
$ 700 comma 000$700,000
$ 300 comma 000$300,000
Trail Running Shoes
440 comma 000440,000
9 comma 0009,000
Running Apparel
60 comma 00060,000
71 comma 00071,000
Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department.
At the end of the year, the following information was gathered related to the production of the trail running shoes and running apparel:
Machining Department
Finishing Department
Trail Running Shoes
442 comma 000442,000
8 comma 5008,500
Running Apparel
57 comma 00057,000
72 comma 00072,000
How much manufacturing overhead will be allocated to the trail running shoes? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
A.
$ 250 comma 000$250,000
B.
$ 650 comma 675$650,675
C.
$ 651 comma 717$651,717
D.
$ 1 comma 000 comma 475$1,000,475
Click to select your answer.
Machining Department
Finishing Department
Estimated Manufacturing Overhead by Department
$ 700 comma 000$700,000
$ 300 comma 000$300,000
Trail Running Shoes
440 comma 000440,000
machine hours9 comma 0009,000
direct labor hoursRunning Apparel
60 comma 00060,000
machine hours71 comma 00071,000
direct labor hoursExplanation / Answer
Machining Department overhead rate = 700000/(440000+60000)= $1.4 Finishing Department overhead rate = 300000/(9000+71000)= $3.75 Manufacturing overhead allocated to the trail running shoes = (442000*1.4)+(8500*3.75)= $650675 Option B is correct
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