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Walker Co. makes three products in its factory: plastic cups, plastic tableclothes, and plastic bottles. The expected overhead costs for the next fiscal year include the following.

  • Factory manager's salary $130,000
  • Factory utility cost 60,500
  • Factory supplies 28,000
  • Total overhead costs $218,500

Walker uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows:

  • Cups 420 hours
  • Tablecloths 740
  • Bottles 1,140
  • Total machine hours 2,300

Required

a. Allocate the budgeted overhead costs to products.
b. Provide a possible explanation as to why Walker chose machine hours, instead of labor hours, as the allocation base.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M9975546

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