Question

Schell Company manufactures automobile floor mats. It currently has two product lines, the Standard and the Deluxe. Schell has a total of $26,540 in overhead. It currently uses a traditional cost system with overhead applied to the product on the basis of either labor hours or machine hours. Schell has compiled the following information about possible cost drivers and its two product lines: Schell Company Total 1,080 labor hours 6,930 machine hours Quantity/Amount Consumed by Standard Floor Mat Line 720 labor hours 2,910 machine hours Quantity/Amount Consumed by Deluxe Floor Mat Line 360 labor hours 4,020 machine hours Required: 1. Suppose Schell uses a traditional costing system with direct labor hours as the cost driver. Determine the amount of overhead assigned to each product line. 2. Suppose Schell uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Suppose Schell uses a traditional costing system with direct labor hours as the cost driver. Determine the amount of overhead assigned to each product line. (Round activity rates to 4 decimal places and final answers to 2 decimal places.) Overhead Assigned Standard Floor Mat neluxe Floor Mat

Answer 1

Solution:

Required 1:- The solution to overhead assigned on the basis of direct labor hours being the cost driver is as follows:

On the basis of labour Hours as Cost Driver:	Particulars	Amount
A	Total Overheads of Schell Company (in $)	26450
B	Standard Floor Labor Hours	720
C	Deluxe Floor Labor Hours	360
D	Total Labour Hours	1080
E	Overhead per labor Hour (A/D)	24.4907
Particulars	E*No. of labor Hours	Overhead Assigned
Standard Floor Mat	24.4907*720	17633.33
Deluxe Floor Mat	24.4907*360	8816.67
	Total	26450.00

Required 2:- The solution to overhead assigned on the basis of machine hours being the cost driver is as follows:

On the basis of Machine Hours as Cost Driver:	Particulars	Amount
A	Total Overheads of Schell Company (in $)	26450
B	Standard Floor Machine Hours	2910
C	Deluxe Floor Machine Hours	4020
D	Total Machine Hours	6930
E	Overhead per Machine Hour (A/D)	3.8167
Particulars	E*No. of Machine Hours	Overhead Assigned
Standard Floor Mat	3.8167*2910	11106.71
Deluxe Floor Mat	3.8167*4020	15343.29
	Total	26450.00