X Company has two production departments, A and B. At the start of the year, the
ID: 2508021 • Letter: X
Question
X Company has two production departments, A and B. At the start of the year, the following budgeted information is available:
The following information is for two specific jobs, Job 111 and Job 222, that were completed during the year:
3. Using a plantwide allocation system with direct labor hours as the cost driver, what is the allocation to Job 222 (round overhead rates to the nearest cent)? ANSWER IS NOT 80080.
b)Using a departmental allocation system with direct labor hours as the cost driver in Department A and machine hours as the cost driver in Department B, what is the allocation to Job 222 (round overhead rates to the nearest cent)?
Explanation / Answer
3. Using a plantwide allocation system with direct labor hours as the cost driver, what is the allocation to Job 222 (round overhead rates to the nearest cent)?
Total Plant wide overhead = $4,600,000 + $2,200,000= $6,800,000
Total Labour Hour = 40000 + 40000 = 80000
Overhead Rate = Total Plant wide overhead/Total Labour Hour
Overhead Rate = $6,800,000/80000
Overhead Rate =$ 85
Allocation of Overhead to Job 222 = Overhead Rate*Total Labour Hour worked on Job 222 = 85*(385+651) = $ 88060
Answer: $ 88060
b)Using a departmental allocation system with direct labor hours as the cost driver in Department A and machine hours as the cost driver in Department B, what is the allocation to Job 222 (round overhead rates to the nearest cent)?
Cost Driver Rate for Department A = $4,600,000/40000 = 115.00
Cost Driver Rate for Department B = $2,200,000/140000 = 15.71
Allocation of Overhead to Job 222 = 385*115 + 700*15.71 = $ 55,272
Answer: $ 55,272
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