X Company has two production departments, A and B. At the start of the year, the

Question

X Company has two production departments, A and B. At the start of the year, the following budgeted information is available:

The following information is for two specific jobs, Job 111 and Job 222, that were completed during the year:

3. Using a plantwide allocation system with direct labor hours as the cost driver, what is the allocation to Job 222 (round overhead rates to the nearest cent)? ANSWER IS NOT 80080.

b)Using a departmental allocation system with direct labor hours as the cost driver in Department A and machine hours as the cost driver in Department B, what is the allocation to Job 222 (round overhead rates to the nearest cent)?

Department A    Overhead $4,600,000    Direct labor hours 40,000    Machine hours 120,000 Department B    Overhead $2,200,000    Direct labor hours 40,000    Machine hours 140,000

Explanation / Answer

Using a plantwide allocation system with machine hours as the cost driver, what is the allocation to Job 222 (round overhead rates to the nearest cent and your answer to the nearest dollar)?

overhead rate = (4,6000,000 + 2,200,000)/(120,000 + 140,000) = 9 $26.15 per machine hour

Allocation to job 222: 26.15*(1300 + 700) = $52,300

Using a departmental allocation system with machine hours as the cost driver in Department A and direct labor hours as the cost driver in Department B, what is the allocation to Job 222 (round overhead rates to the nearest cent and your answer to the nearest dollar)?

Dept A rate: 4,600,000/120,000 = $38.33 per machine hour
Dept B rate: 2,200,000/40,000 = $55 per labor hour
Allocated to job 222: 38.33*1300 + 55*651 = $85634

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