Hi, Just trying to understand how they achieved the answer? Use the following in

Question

Hi,

Just trying to understand how they achieved the answer?

Use the following information about Riley's rewards to allocate cost using a single plantwide over head rate.

Forming Deptment

Finishing

How much cost would be assigned to Trophies if a single plant wide allocation based is used and cost is allocated based total direct labor costs?

Use the following information about Riley's rewards to allocate cost using a single plantwide over head rate.

Forming Deptment

Trophies Plaques Total Direct material 12,500 11,175 23,675 Direct Labor 15,000 9,000 24,000 Indirect costs setup costs 40 setups 40 setups 10,000 indirect labor 8,000

Finishing

Trophies Plaques Total Direct material 2,400 9,200 11,600 Direct Labor 8,800 12,200 21,000 Indirect costs setup costs 80 setups 90 setups 24,000 indirect labor 10,000

How much cost would be assigned to Trophies if a single plant wide allocation based is used and cost is allocated based total direct labor costs?

ans: 27,502

Thanks!

Explanation / Answer

Hi,

Please find the answer as follows:

Single Plant-Wide Overhead Rate will be calculated by adding overhead costs for both the departments and diving it by total direct labor cost and multiplying it with the total of direct labor cost (trophies) for both the departments

Plant Wide Overhead Rate = (10000 + 8000 + 24000 + 10000)/(24000 + 21000)*(15000 + 8800) = 27502.22 or 27502

Answer is 27502

Thanks.

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