Willey Company makes three products in its factory: plastic cups, plastic tablec

Question

Willey Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following: Factory manager’s salary $ 210,000 Factory utility cost 70,000 Factory supplies 20,000 Total overhead costs $ 300,000 Willey uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows: Cups 300 Hours Tablecloths 750 Bottles 950 Total machine hours 2,000 Required Allocate the budgeted overhead costs to the products.

Explanation / Answer

Predetermined Overhead Rate using machine hours = Total overhead costs /  Total machine hours

= $ 300,000 / 2,000 Machine Hours

= $ 150 per machine hour.

Allocated budgeted overhead costs :

Cups = 300Hours * $ 150 per machine hour

= $ 45,000

TableCloths = 750 Hours * $ 150 per machine hour

= $ 112,500

Bottles = 950 Hours * $ 150 per machine hour

= $ 142,500

Hence the correct answer is :

Cups= $ 45,000

TableCloths = $ 112,500

Bottles = $ 142,500

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