Question

X Company has two production departments, A and B. The following is budgeted information for all of its products in 2019, and actual information for one of them, Product X:

Department A	All Products	Product X
Overhead	$3,900,000	--
Direct labor hours	60,000	868
Machine hours	120,000	1,020
Units produced	60,000	640
Department B
Overhead	$2,100,000	--
Direct labor hours	50,000	281
Machine hours	120,000	850
Units produced	30,000	640

Using a single-driver allocation system, with direct labor hours as the driver, how much overhead was allocated to Product X [round overhead rate(s) to two decimal places]?

Answer 1

overhead rate of department A = total overhead cost / number of direct labor hours

=>$3,900,000 / 60,000 hours

=>$65.per labor hour.

total overhead of department A allocated to product X = direct labour hours of product * rate per hour

=>868 * $65

=>$56,420.

overhead rate of department B = $2,100,000 / 50,000 hours

=>$42 per labor hour

total overhead of department B which is allocated to product x = $42*281 hours.

=>$11,802.

total overhead allocated to product x from departments = $56,420+11,802

=>$68,222.