E4-7 Calculating Traditional Overhead Rates, Assigning Costs [LO 4-1] Bluefield
ID: 2421722 • Letter: E
Question
E4-7 Calculating Traditional Overhead Rates, Assigning Costs [LO 4-1]
Bluefield Corp. has two product lines, A and B. Bluefield has identified the following information about its overhead and potential cost drivers:
Total overhead $ 112,500
Cost drivers
Number of labor hours 2,500
Number of machine hours 59,800
Required :
1.
Suppose Bluefield Corp. uses a traditional costing system with number of labor hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A requires 70 percent of the labor hours and Product B requires 30 percent.
2.
Suppose Bluefield uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A consumes 22,100 machine hours and Product B consumes 37,700. (Round intermediate calculations to 2 decimal places and your final answers to the nearest whole dollar amount.)
Overhead Assigned Product A Product BExplanation / Answer
1) Overhead allocation based on labour overheads:
Product A: 70% of 112500 = $78750
Product B: 30% of 112500 = $33750
2) Overhead allocation based on Machine Hours:
Product A: 112500 * 22100/59800 = $41576.10
Product B: 112500 * 37700 / 59800 = $ 70923.90
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