CALCULATOR PRINTER VERSION BACK NEXT RCES RK Exercise 7-14 Marigold makes two pr

Question

CALCULATOR PRINTER VERSION BACK NEXT RCES RK Exercise 7-14 Marigold makes two products, Sjmple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bells and whistles. The company has always allocated overhead costs to products based on machine hours. Last year, the company implemented an activity-based costing system, and managers determined the following activity pools and rates based on total overhead of $1,486,800: Rate $1.25 per direct labor hour $9.75 per machine hour $18 per batch $115,550 direct to Complex Assembly Study Fabrication Setups Bonding Only the Complex product requires bonding, so all the costs of bonding should be allocated to Complex. The following data relate to both products. Units produced Direct labor hours Machine hours Batches Simple 126,000 233,000 54,000 2,300 Complex 46,000 108,000 30,000 4,700

Explanation / Answer

Overhead rate = Total overhead / Total machine hour

                        = 1486800/84000

Overhead rate = 17.70 per machine hour

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