signment ‰TER VERSION Assignment page CALCULATOR ·BACK Exercise 7-14 Sheridan ma

Question

signment ‰TER VERSION Assignment page CALCULATOR ·BACK Exercise 7-14 Sheridan makes two products, Simple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bels and whisties. The company has slways rates based on total overhead of $1,485,700: Rate $1.25 per direct labor hour $9.75 per machine hour $18 per batch $107,700 direct to Fabrication Setups y Bonding Only the Complex product requires bonding, so all the costs of bonding should be allocated to Compliex. The fellowing data relate to both products Units produced Direct labor hours Machine hours Batches Simple 128,000 238,000 51,000 3,000 Complex 46,000 109,000 32,000 4,500 Using the traditional method of allocating overhead costs, allocate overhead cost to the products show that the overhead assigned to each product sums to the total company overhead determine the overhead cost per unit for each product (Round overhead rate and overhead per unit answers to 2 decimal places, eg. 15.25) 16 1 D F3

Explanation / Answer

Solution:

Using the Traditional Method of Allocating Overhead Costs:

Using the Activity Based Costing Rates:

Total Overhead $1,485,700 Less: Cost direct to Complex ($107,700) Overhead Cost Apportioned $1,378,000 Machine Hours 83,000 Overhead Rate Per MH $16.60

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