Offshore Company makes 2 different types of boats sail and fishing boats. The co

Question

Offshore Company makes 2 different types of boats sail and fishing boats. The company consists of two different departments, design & engineering, and production. The company has decided to allocate overhead costs in each of the two cost pools. Data on estimated overhead follows:

Estimated Sail Fish

Activity: Driver Overhead Cost Estimate Estimate

Design # of designs $180,000 22 designs 18 designs

Production Labor hours $945,000 4,000 hours 3,500 hours

If the company produces and sells 22 sail boats, and each sail boat requires 180 labor hours, how much overhead will be assigned to each sail boat produced?

A. $22,680

B. $27,180

C. $36,900

D. $32,400

Explanation / Answer

Hi,

Please find the answer as follows:

Overhead Allocated = 180000*22/40 +( 22*180*945000)/(3500 + 4000) = 597960/22 = 27180

Option B is correct.

Thanks.

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