Smelly Perfume Company manufactures and distributes several different products.

Question

Smelly Perfume Company manufactures and distributes several different products. The company currently uses a plant wide allocation method for allocating overhead at a rate of $11 per direct labor hour. Cindy is the department manager of Department C which produces Products J and P. Department C has $20,400 in traceable overhead. Diane is the department manager of Department D which manufactures Product X. Department D has $9,450 in traceable overhead. The product costs (per case of 24 bottles) and other information are as follows:

If Smelly changes its allocation basis to machine hours, what is the total product cost per case for Product P?

Smelly Perfume Company manufactures and distributes several different products. The company currently uses a plant wide allocation method for allocating overhead at a rate of $11 per direct labor hour. Cindy is the department manager of Department C which produces Products J and P. Department C has $20,400 in traceable overhead. Diane is the department manager of Department D which manufactures Product X. Department D has $9,450 in traceable overhead. The product costs (per case of 24 bottles) and other information are as follows:

Explanation / Answer

Cost per direct Labour Hour 11 Cost per unit 37.8 Labour Hour per Unit 37.8/11 3.436364 Total Units 500 Total Labour Hours 500*3.44 1718.182 Total Overhead Cost 1718.182*11 18900 Total Overead Cost 37.8*500 18900 Overhead Cost per Machine Hour 18900/1000 18.9 Per Unit 18.9*2 37.8 Calculation of Total Product Case per Case of Product P Direct Material 86 Direct labour 37.8 Overheads 18 Total Cost per case 141.8 There will be no change in cost

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