X Company has two production departments, X and Y. Listed below are budgeted inf

Question

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:

Questions:

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]?

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]?

Department X All Products Product 1    Overhead $6,200,000    -          Direct labor $750,000    $11,565        Direct labor hours 50,000    771        Machine hours 110,000    1,080        Units produced 60,000    680     Department Y    Overhead $2,000,000    -          Direct labor $900,000    $2,145        Direct labor hours 60,000    143        Machine hours 120,000    830        Units produced 33,000    680    

Explanation / Answer

Using a plantwide allocation system with machine hours as the cost driver, what was the allocation to Product 1

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]?

total overhead charged to Product 1 = 60872.7+4767 =$65639

   Machine hours X 110000    Machine hours Y 120000 Total Hour 230000 Total Overhead X 6200000 Y 2000000 Total 8200000 Product 1 Machine Hour X 1080 Y 830 Total 1910 overhead Charged to Product x =(8200000/230000)*1910 68095.65

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