Use the following information about Riley\'s rewards to allocate cost using a tw

Question

Use the following information about Riley's rewards to allocate cost using a two departmental overhead rates.

Forming Deptment

Finishing

How much cost would be assigned to Trophies if departmental rates were used cost is allocated in each depratment based on the department direct labor costs?

ans: 25,917  <------how did they get this? Thanks

Trophies Plaques Total Direct material 12,500 11,175 23,675 Direct Labor 15,000 9,000 24,000 Indirect costs setup costs 40 setups 40 setups 10,000 indirect labot 8,000

Explanation / Answer

Hi,

Please find the answer as follows:

Forming Department Allocation = Total Overhead Cost*Direct Labor Cost for Trophies/Total Direct Labor Cost

Cost Allocared = (10000 + 8000)*15000/24000 = 11250

Finishing Department Allocation = Total Overhead Cost*Direct Labor Cost for Trophies/Total Direct Labor Cost

Cost Allocated = (24000 + 11000)*8800/21000 = 14666.67

Total Cost Allocated = 11250 + 14666.67 = 25916.67 or 25917

Answer is 25917

Thanks.

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