Jefferson Company expects to incur $450,000 in manufacturing overhead costs during the current year. Other budget information follows:
Required:1) Use direct labor hours as the cost driver to compute the allocation rate. Determine the amount of budgeted overhead cost for each department.2) Use machine hours as the cost driver to compute the allocation. Determine the amount of budgeted overhead cost for each department.3) Assume that Department A manufactured a product that required 160 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?4) Assume that Department
A manufactured a product that required 160 direct labor hours and 85 machine hours. If overhead is allocated based on machine hours, how much overhead would be allocated to this product?
What will be an ideal response?
1) Allocation rate = $450,000 ÷ 40,000 direct labor hours = $11.25 per direct labor hour
Amount of overhead allocated to Department A = 15,000 × $11.25 = $168,750
Amount of overhead allocated to Department B = 5,000 × $11.25 = $56,250
Amount of overhead allocated to Department C = 20,000 × $11.25 = $225,000
2) Allocation rate = $450,000 ÷ 30,000 machine hours = $15 per machine hour
Amount of overhead allocated to Department A = 8,000 × $15 = $120,000
Amount of overhead allocated to Department B = 10,000 × $15 = $150,000
Amount of overhead allocated to Department C = 12,000 × $15 = $180,000
3) 160 direct labor hours × $11.25 = $1,800
4) 85 machine hours × $15 = $1,275
You might also like to view...
The respondent is told the real purpose of data collection in all surveys
Indicate whether the statement is true or false
The mission statement defines the future of the organization.
a. True b. False
Which of the following is FALSE regarding capacity expansion?
A) "Average" capacity sometimes leads demand, sometimes lags it. B) If "lagging" capacity is chosen, excess demand can be met with overtime or subcontracting. C) Total cost comparisons are a rather direct method of comparing capacity alternatives. D) Capacity may only be added in large chunks. E) In manufacturing, excess capacity can be used to do more setups, shorten production runs, and drive down inventory costs.
Actions that help a firm increase the price of its stock also _____.?
A. ?result in manufacturing of low-quality products B. ?result in inflation C. ?require the development of products that consumers want and need D. ?require investment in high-cost manufacturing plants E. ?result in sale of goods and services at highest possible prices