A company has fixed manufacturing overhead of $100,000 that needs to be allocate
ID: 2421978 • Letter: A
Question
A company has fixed manufacturing overhead of $100,000 that needs to be allocated to a product cost object. Six different allocation bases are being considered, as shown in the table immediately below. Allocate the $100,000 of fixed manufacturing overhead under each of the six bases presented in the table.
Given Information
SOLUTION
Possible
Allocation Base
Total
Factory
Amount
Product 1
Total
Amount
Overhead per
Unit of
Allocation Base
(round to
nearest penny)
Overhead
Allocated to
Product 1
(round to
nearest dollar)
Direct labor hours
5,000
500
Direct labor dollars
$200,000
$15,000
Machine hours
2,500
90
Direct material pounds
40,000
3,000
Direct material dollars
$400,000
$16,500
Units produced
25,000
2,000
Given Information
SOLUTION
Possible
Allocation Base
Total
Factory
Amount
Product 1
Total
Amount
Overhead per
Unit of
Allocation Base
(round to
nearest penny)
Overhead
Allocated to
Product 1
(round to
nearest dollar)
Direct labor hours
5,000
500
Direct labor dollars
$200,000
$15,000
Machine hours
2,500
90
Direct material pounds
40,000
3,000
Direct material dollars
$400,000
$16,500
Units produced
25,000
2,000
Explanation / Answer
Possible Allocation Base
Total Factory Amount
Product 1 Total Amount
Overhead per Unit of Allocation Base (round to nearest penny)
Overhead Allocated to Product 1 (round to nearest dollar)
Possible Allocation Base
Total Factory Amount
Product 1 Total Amount
Overhead per Unit of Allocation Base (round to nearest penny)
Overhead Allocated to Product 1 (round to nearest dollar)
Direct labor hours 5000 500 20 Direct labor dollars $200000 $15000 $100000 $10000 Machine hours 2500 90 40 Direct material pounds 40000 3000 2.5 Direct material dollars $400000 $16500 $100000 $7500 Units produced 25000 2000 4Related Questions
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