Question

A company has a fixed manufacturing overhead of $400,000 that needs to be allocated to a product cost object. Six different allocation bases are being considered, as shown in the table immediately below. Allocate the $400,000 of fixed manufacturing overhead under each of the six bases presented in the table. If rate is $12 has to be shown as $12.00. If an overhead allocation is $19,138.89 has to be shown has $19,140.

Given Information			SOLUTION
Possible Allocation Base	Total Factory Amount	Product 1 Total Amount	Overhead per Unit of Allocation Base (round to nearest penny)	Overhead Allocated to Product 1 (round to nearest dollar)
Direct labor hours	5,000	500
Direct labor dollars	$200,000	$15,000
Machine hours	2,500	260
Direct material pounds	40,000	3,000
Direct material dollars	$400,000	$25,000
Units produced	25,000	3,000

Answer 1

Allocation of manufacturing overhead: А 1 Allocation Base 2 Direct labor hours 3 Direct labor dollars 4 Machine hours 5 Direct material pounds 6 Direct material dollars 7 Units produced B D E Overhead per Overhead Unit of Allocated to Allocation Base Product 1 (round Total Factory Product 1 Total (round to to nearest Amount Amount nearest penny) dollar) 5,000 5001 $80.00 $40,000 $200,000 $15,000 $2.00 $30,000 2,500 260 $160.00 $41,600 40,000 3,000 $10.00 $30,000 $400,000 $25,000 $1.00 $25,000 25,000 3,000 $16.00 $48,000 Calculations are shown below: A B с D E Overhead per Overhead Unit of Allocated to Total Allocation Base Product 1 Factory Product 1 (round to (round to 1 Allocation Base Amount Total Amount nearest penny) nearest dollar) 2 Direct labor hours 5000 500 =400000/B2 =C2*D2 3 Direct labor dollars 200000 15000 =400000/B3 =C3*D3 4 Machine hours 2500 260 =400000/B4 =C4*D4 5 Direct material pounds 40000 3000 =400000/B5 =C5*D5 6 Direct material dollars 400000 25000 =400000/B6 =C6*D6 7 Units produced 25000 3000 =400000/B7 =C7*D7