Question
Need help on this problem. Can someone please help me..
a. Total overhead ÷ total hours = Rate
Product costs = Rate x Machine hours for each product
b. Department rate = Overhead ÷ Machine hours
Product allocation = Machine hours per product x Department rate; Add both department allocations together to obtain a total per product
eBook Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion Peach Computer Company manufactures a desktop and portable computer through two production departments, Assembly and Testing. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Peach: Assembly Department Testing Department $205,000 754,400 $959,400 Total Direct machine hours were estimated as follows: Assembly Department Testing Department 4,100 hours 8,200 Total 12,300 hours In addition, the direct machine hours (dmh) used to produce a unit of each product in each department were determined from engineering records, as follows: Desktop 0.50 dmh 1.00 1.50 dmh Portable 1.00 dmh 2.00 3.00 dmh Assembly Department Testing Department Total machine hours per unit a. Determine the per-unit factory overhead allocated to the desktop and portable computers under the single plantwide factory overhead rate method, using direct machine hours as the allocation base Desktop $ Portable $ b. Determine the per-unit factory overhead allocated to the desktop and portable computers under the multiple production department factory overhead rate method, using direct machine hours as the allocation base for each department. Desktop $ Portable $ $117 per unit 234 per unit per unit per unit
Explanation / Answer
b)
Department Assembly Testing Overhead $ 2,05,000.00 $ 7,54,400.00 Direct machine hours used 4,100.00 8,200.00 Overhead allocation rate per hour $ 50.00 $ 92.00
