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10 November, 20:48

Willey Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following: Factory manager's salary $210,000 Factory utility cost 70,000 Factory supplies 20,000 Total overhead costs $300,000 Willey uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows: Cups 300 Hours Tablecloths 750 Bottles 950 Total machine hours 2,000 Required: Allocate the budgeted overhead costs to the products.

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  1. 10 November, 20:53
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    Cups = $45,000

    Tablecloths = $1,12,500

    Bottles = $1,42,500

    Explanation:

    Given that,

    Factory manager's salary = $210,000

    Factory utility cost = 70,000

    Factory supplies = 20,000

    Overhead allocation rate:

    = Budgeted Overhead : Budgeted Base of allocation

    = Total overhead costs : Total machine hours

    = $300,000 : 2,000

    = $150 per machine hour

    Cups:

    Allocated cost = Allocation rate * Weight of base

    = $150 * 300

    = $45,000

    Tablecloths:

    Allocated cost = Allocation rate * Weight of base

    = $150 * 750

    = $1,12,500

    Bottles:

    Allocated cost = Allocation rate * Weight of base

    = $150 * 950

    = $1,42,500
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