Question

A company has two departments within its production facility. You have the following information for both departments: Total Estimated Manufacturing Overhead Total Estimated Direct Labor Hours Total Estimated Machine Hours Department 1 $450,000 225,000 10,000 Department 2 $550.000 10,000 40,000 Total $1,000,000 235,000 50,000 If a plant-wide rate is used based on machine hours, and product A used a total of 21 machine hours, the total overhead applied to product A would be: $288.75 $340.00 $420.00 $331.00

Answer 1

Part 1

Total estiamted manufacturing overhead = $1,000,000

Total estimated machine hours = 50,000

Predetermined overhead rate = Total estiamted manufacturing overhead/Total estimated machine hours

= 1,000,000/50,000

= $20 per machine hour

Actual machine hour used by Product A = 21

Total overhead applied to Product A = Predetermined overhead rate x Actual machine hour used by Product A

= 20 x 21

= $420

Third option is correct

Part 2

manufacturing overhead rate in Department 1 = $4 per direct labor hour

manufacturing overhead rate in Department 2 = $27.50 per machine hour

Direct labor hour used by product B in department 1 = 55

machine hours used by Product B in department 2 = 30

Total overhead applied to product B = (manufacturing overhead rate in Department 1 x Direct labor hour used by product B in department 1 ) + (manufacturing overhead rate in Department 2 x Direct labor hour used by product B in department 2)

= (4 x 55) + (27.50 x 30)

= 220 + 825

= $1,045

Correct option is first