X Company has two production departments, 1 and 2. Listed below are budgeted inf

Question

X Company has two production departments, 1 and 2. Listed below are budgeted information for the two departments, and actual information for one of its products, Product X:

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

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

Department 1 All Products Product X    Overhead $5,800,000    -          Direct labor $850,000    $12,393        Direct labor hours 50,000    729        Machine hours 110,000    1,030        Units produced 59,000    670     Department 2    Overhead $1,800,000    -          Direct labor $680,000    $4,896        Direct labor hours 40,000    288        Machine hours 140,000    840        Units produced 39,000    670    

Explanation / Answer

Particulars Amount Direct Labor department 1 12393 Direct Labor department 2 4896 Overhead Department 1 ( 5800000/50000*729) 84564 Overhead Department 2 ( 1800000/40000*288) 12960 Total Cost 114813 Units Produced 670 Per Unit Cost      171.36 Particulars Amount Direct Labor department 1 12393 Direct Labor department 2 4896 Overhead Department 1 ( 5800000/50000*729) 84564 Overhead Department 2 ( 1800000/140000*840) 10800 Total Cost 112653 Units Produced 670 Per Unit Cost      168.14

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