Groupon Corporation expects to incur $450,000 in manufacturing overhead costs du
ID: 2467195 • Letter: G
Question
Groupon Corporation expects to incur $450,000 in manufacturing overhead costs during 2016. Other budget information follows: Required: Use direct labor hours as the cost driver to compute the allocation rate. Determine the amount budgeted overhead cost for each department. Use machine hours as the cost driver to compute the allocation rate. Determine the amount of budgeted overhead cost for each department. Assume that Department A manufactured a product that required 150 direct labor hours and 85 machine hours. If overhead Is allocated based on direct labor hours, how much overhead would be allocated to this product? Assume that Department A manufactured a product that required 150 direct labor hours and 85 machine hours. If overhead Is allocated based on machine hours, how much overhead would be allocated to this product?Explanation / Answer
1.
Budgeted Overhead Cost(Direct Labor Hours as Cost Driver)
Department A
Department B
Department C
Manufacturing Overhead
$225000
($450000*10000/20000)
$180000
($450000*8000/20000)
$45000
($450000*2000/20000)
1.
Budgeted Overhead Cost(Machine Hours as Cost Driver)
Department A
Department B
Department C
Manufacturing Overhead
$90000
($450000*3000/15000)
$150000
($450000*5000/15000)
$210000
($450000*7000/15000)
2. The Overhead Allocated for the Product Under department A(Cost Driver Direct labor Hours)
150*($225000/$10000) = $3375
3. The Overhead Allocated for the Product Under department A(Cost Driver Machine Hours)
85*($90000/$3000) = $2550
Budgeted Overhead Cost(Direct Labor Hours as Cost Driver)
Department A
Department B
Department C
Manufacturing Overhead
$225000
($450000*10000/20000)
$180000
($450000*8000/20000)
$45000
($450000*2000/20000)
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