Compute overhead allocated to product X as follows:
Particulars | Product X |
Direct labor hours used in Department A | 711 |
Direct labor hours used in Department B | 223 |
Total direct labor hours used | 934 |
× Predetermined overhead rate per hour | $101.11 |
Total overhead allocated to Product X | $94,436.74 |
Notes: Compute predetermined overhead rate as follows
Predetermined overhead rate = Estimated total overhead cost ÷ Estimated total direct labor hours
= $9,100,000 ÷ 90,000 hours
= $101.11 per hour
Compute estimated total overhead cost as follows
Particulars | Amount |
Overhead costs - Department A | $7,300,000 |
Overhead costs - Department B | $1,800,000 |
Total estimated overhead costs of the company | $9,100,000 |
Compute estimated total direct labor hours as follows
Particulars | Hours |
Direct labor hours - Department A | 40,000 |
Direct labor hours - Department B | 50,000 |
Estimated total direct labor hours | 90,000 |
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