Teagan Company uses Departmental Overhead allocation to allocate its manufacturing overhead costs. It has identified two departments: Machining & Assembly. The Machining department allocates overhead using machine hours, and the Assembly department allocates overhead using direct labor hours. It has accumulated the following data for 2018: Machining Department estimated manufacturing overhead: $670,000 Assembly Department esimated manufacturing overhead: $450,000 Total estimated overhead costs $1,120,000 Estimated machine hours in the machining department: 10,000 hours Estimated direct labor hours in the assembly department: 15,000 hours The following shows the amount of machine hours and direct labor hours incurred by Job #601 within each department: Machining Department: 9 Machine Hours 4 DL hours Assembly Department: 15 DL hours What is the amount of total allocated overhead for Job?

Question

Cody Shaw

Business

20 June, 00:35

Teagan Company uses Departmental Overhead allocation to allocate its manufacturing overhead costs. It has identified two departments: Machining & Assembly. The Machining department allocates overhead using machine hours, and the Assembly department allocates overhead using direct labor hours. It has accumulated the following data for 2018: Machining Department estimated manufacturing overhead: $670,000 Assembly Department esimated manufacturing overhead: $450,000 Total estimated overhead costs $1,120,000 Estimated machine hours in the machining department: 10,000 hours Estimated direct labor hours in the assembly department: 15,000 hours The following shows the amount of machine hours and direct labor hours incurred by Job #601 within each department: Machining Department: 9 Machine Hours 4 DL hours Assembly Department: 15 DL hours What is the amount of total allocated overhead for Job?

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Ciara Hutchinson · Answer 1

Machining:

Allocated MOH = $603

Assembly:

Allocated MOH = $450

Explanation:

Giving the following information:

Machining:

Allocates overhead using machine-hours

Estimated manufacturing overhead: $670,000

Estimated machine-hours = 10,000

Assembly:

Allocates overhead using direct labor hours.

Estimated manufacturing overhead: $450,000

Estimated direct labor hours = 15,000 hours

First, we need to calculate the estimated manufacturing overhead rate for each department:

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Machining:

Estimated manufacturing overhead rate = 670,000/10,000 = $67 per machine hour

Assembly:

Estimated manufacturing overhead rate = 450,000/15,000 = $30 per direct labor hour.

Job 601:

Machining Department: 9 Machine Hours

Assembly Department: 15 DL hours

To allocate overhead we use the following formula:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Machining:

Allocated MOH = 67*9 = $603

Assembly:

Allocated MOH = 30*15 = $450