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:

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]?

Please help me. This is the only problem I can't get.

Department X All Products Product 1    Overhead $6,800,000    -          Direct labor $680,000    $13,583        Direct labor hours 40,000    799        Machine hours 110,000    1,100        Units produced 60,000    860     Department Y    Overhead $2,100,000    -          Direct labor $850,000    $4,879        Direct labor hours 50,000    287        Machine hours 120,000    890        Units produced 35,000    860    

Explanation / Answer

Solution:

OHR= Total overhead/ Total machine hours

=(6800000+2100000)/(110000+120000)=8900000/230000=38.69

Allocation to product 1:

(1100*38.69+890*38.69) =42559+34434.1=76993.1

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