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: Product X All Products $5,800,000 40,000 100,000 53,000 748 1,070 610 Department A Overhead Direct labor hours Machine hours Units produced Department B Overhead Direct labor hours Machine hours Units produced 191 $1,800,000 40,000 140,000 46,000 870 610 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

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

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

= $7,600,000

Total estimated direct labor hours = Estimated direct labor hours of Department A + Estimated direct labor hours of Department B

= 40,000+40,000

= 80,000 hours

Predetermined overhead rate = Total estimated overheads / Total estimated direct labor hours

= 7,600,000/80,000

= $95 per direct labor hours

Direct labor hour used by Product X = Direct labor hours use in Department A + Direct labor hours use in Department B

= 748+191

= 939

Overhead allocated to product X = Direct labor hour used by Product X x Predetermined overhead rate

= 939 x 95

= $89,205

Kindly comment if you need further assistance. Thanks