Bigelow Company allocates manufacturing overhead costs based on machine hours fo
ID: 2492898 • Letter: B
Question
Bigelow Company allocates manufacturing overhead costs based on machine hours for its two products; fishing rods and lures. Manufacturing overhead costs are expected to total $208,700 in the coming year and the company plans to use 64,000 machine hours in the year. The production of fishing rods requires 1.5 machine hours per rod and lures require 45 minutes per lure. The current production schedule calls for 4,000 fishing rods and 25,000 lures for 2016. a.What is the overhead rate per machine hour? b.If production and overhead costs occur as scheduled, how much manufacturing overhead will be allocated to each of the two products?
Explanation / Answer
a.
Overhead rate per machine hour = Budgeted manufacturing overhead costs/Budgeted machine hours = $208,700/64,000 machine hours = $3.26 per machine hour
b.
Product
Units
Machine hour per unit
Total machine hour
Overhead rate
Allocated overhead cost
Fishing rod
4,000
1.5
6,000
$ 3.26
$ 19,560.00
Lure
25,000
0.75
18,750
$ 3.26
$ 61,125.00
$ 80,685.00
Product
Units
Machine hour per unit
Total machine hour
Overhead rate
Allocated overhead cost
Fishing rod
4,000
1.5
6,000
$ 3.26
$ 19,560.00
Lure
25,000
0.75
18,750
$ 3.26
$ 61,125.00
$ 80,685.00
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