X Company has two production departments,A and B.At the start of the year,the fo
ID: 2373444 • Letter: X
Question
X Company has two production departments,A and B.At the start of the year,the following budgeted information is available:
Department A
Overhead $4,100,000
Direct labor hours 50,000
Machine hours 110,000
Department B
Overhead $1,900,000
Direct labor hours 60,000
Machine hours 130,000
The following information is for two specific jobs,Job 111 and Job 222,that were completed during the year:
Department A Department B
Job 111
Direct labor hours 735 222
Machine hours 1,070 840
Job 222
Direct labor hours 337 520
Machine hours 1,290 700
1.Using a plantwide allocation system with direct labor hours as the cost driver,what is the allocation to Job 222?
2.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?
Explanation / Answer
Dept A OH Rate = OH/DL Hrs = 4100000/50000 = $82.00
Dept B PH Rate = 1900000/60000 = $31.67
1. Job222 OH allocation = 337*$82+520*$31.67
= $44,102.40
2. OH rate for dept A = $82 per DL Hr
Dept B OH rate = OH/No of MC hr
= 1900000/130000 = $14.62 per MC Hr
So Job222 OH = 337*82 + 700*14.62 = $37,868.00
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