Question

Required information [The following information applies to the questions displayed below.) Angle Max Industries produces a product which goes through two operations, Assembly and Finishing, before it is ready to be shipped. Next year's expected costs and activities are shown below. Direct labor hours Machine hours Overhead costs Assembly 230,000 DLH 430,000 MH $430,000 Finishing 153,000 DLH 64,500 MH $657,900 Assume that the Assembly Department allocates overhead using a plantwide overhead rate based on machine hours. How much total overhead will be assigned to a product that requires 1 direct labor hour and 2.5 machine hours in the Assembly Department, and 3.5 direct labor hours and 0.5 machine hours in the Finishing Department? Multiple Choice O $11.00. O $6.00 O O $13.00

C) 7.50

D) 10.50

Answer 1

Under the plant-wide overhead rate, single overhead is calculated and used for the whole company on a single basis. Hence the single overhead rate for whole company based on machine hours is as follows:
Total overhead cost = $430,000 + $657,900 = $1,087,900
Total machine hours = 430,000 + 64,500 = 494,500

Plantwide overhead rate = Total overhead cost / Total machine hours
= $1,087,900 / 494,500
= $2.2 per machine hour

Total overhead allocated to product = (Assembly dept. machine hours + Finished dept. machine hours) * Overhead rate
= (2.5 hours + 0.5 hours) * $2.2
= $6.6

Hence the answer is $6.6.
So please check your options available as these options are not correct as per answer calculated on basis of question details given.