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22 July, 12:37

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:

Department A All Products Product X

Overhead $4,300,000 - -

Direct labor hours 50,000 724

Machine hours 110,000 1,000

Units produced 54,000 590

Department B

Overhead $2,200,000 - -

Direct labor hours 60,000 157

Machine hours130,000 880

Units produced 40,000 590

Required:

a. 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]?

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Answers (1)
  1. 22 July, 12:52
    0
    Overhead allocated to Product X = Department A overhead cost + Department B overhead cost

    = $51,157.84+$5755.62=

    = $56,913

    Calculations:

    Using a single-driver allocation system, with direct labor hours as the driver, how much overhead was allocated to Product X:

    Department A's Overhead rate per labor hour = Overhead costs/Total direct labor hours = $4300000/60000 hours = $71.66 per hour

    Overhead (Department A) = $71.66per hour*724 labor hours

    = $51,157.84

    Department B's Overhead rate per labor hour = Overhead costs/Total direct labor hours = $2200000/60000 hours = $36.66 per hour

    Overhead (Department A) = $36.66 per hour*157 labor hours

    = $5755.62
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