Questions: 1. Using a plantwide allocation system with machine hours as the cost

Question

Questions:

1. Using a plantwide allocation system with machine hours as the cost driver, what was the allocation to Product 1 [round overhead rates to the nearest cent]?

2. Using a departmental allocation system with machine hours as the cost driver in Department X and direct labor hours as the cost driver in Department Y, what was the allocation to Product 1 [round overhead rates to the nearest cent]?

X Company has two production departments, X and Y. Listed below are budgeted information for the two departments, and actual information for one of its products, Product 1: Department X AlI Products Product 1 Overhead Direct labor Direct labor hours Machine hours Units produced $6,200,000 $11,565 $750,000 50,000 110,000 60,000 1,080 680 Department Y Overhead Direct labor Direct labor hours Machine hours Units produced $2,000,000 $900,000 60,000 120,000 33,000 $2,145 143 830 680

Explanation / Answer

Option 1 Department X All Produts Product 1 Basis of allocation overhead 6200000 38502.00 1080*35.65 Department Y overhead 2000000 29589.50 830*35.65 Plantwise Allocation System = (6200000+2000000) / (110000+120000) = 35.65 Option 2 Department X All Produts Product 1 Basis of allocation overhead 6200000 61182.00 1080*56.65 Department Y overhead 2000000 4766.19 143*33.33 Dept Allocation System Dept X = 6200000/ 110000 = 56.36 Dept Y = 2000000/ 60000 = 33.33

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