Willey Company makes three products in its factory: plastic cups, plastic tablec

Question

Willey Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following Factory manager's salary Factory utility cost Factory supplies Total overhead costs $210,000 70,000 20,000 $300,000 Willey uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows: Cups Tablecloths Bottles Total machine hours 300 Hours 750 950 2,000 Required a. Allocate the budgeted overhead costs to the products. Product Allocation Ratex Weight of Base Allocated Cost Cups Tablecloths Bottles Total 0

Explanation / Answer

Overhead allocation rate

= Budgeted Overhead / Budgeted Base of allocation

= Total overhead costs / Total machine hours

= $300,000 / 2,000

= $150 per machine hour

The following table shows the allocation of overhead to different products

Calculations A B C = A x B Product Allocation rate Weight of base Allocated cost Cups                     150                     300              45,000 Tablecloths                     150                     750           1,12,500 Bottles                     150                     950           1,42,500                  2,000           3,00,000

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