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	$5,800,000	--
Direct labor hours	50,000	825
Machine hours	100,000	1,070
Units produced	59,000	810
Department B
Overhead	$1,900,000	--
Direct labor hours	40,000	159
Machine hours	120,000	820
Units produced	44,000	810

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

Answer 1

Total estimated overheads = Estimated overheads of Department A + Estimated overheads of Department B

= 5,800,000+1,900,000

= $7,700,000

Total estimated machine hours = Estimated machine hours of Department A + Estimated machine hours of Department B

= 100,000+120,000

= $220,000

Predetermined overhead rate = Total estimated overheads / Total estimated machine hours

= 7,700,000/220,000

= $35

Machine hours used by Product X = Machine hours use in Department A + Machine hours use in Department B

= 1,070+820

= 1,890

Overhead allocated to product X = Machine hours used by Product X x Predetermined overhead rate

= 1,890 x 35

= $66,150

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