X Company produces many different products within the same manufacturing plant. It currently uses a single driver, plantwide allocation system to allocate its overhead, with direct labor hours as the most appropriate cost driver. Estimated direct labor hours for 2015 are 90,000; estimated overhead is $168,000.
Assume the following information for one of its products, Product 1, in 2015:
|
Direct materials
|
$67,600
|
|
Direct labor
|
$15,552
|
|
Direct labor hours
|
972
|
|
Machine hours
|
1,850
|
3. Using the single driver system, allocate overhead to Product 1 (round overhead rate(s) to two decimal places).
Question 4 Assume that X Company has decided to switch to a departmental allocation system. It has two departments, and will use direct labor hours as the cost driver in Department 1 and machine hours as the cost driver in Department 2. The following are budgeted costs and driver amounts for these two departments in 2015:
|
|
Department 1
|
Department 2
|
|
Overhead
|
$110,000
|
$58,000
|
|
Direct labor
|
$640,000
|
$800,000
|
|
Direct labor hours
|
40,000
|
50,000
|
|
Machine hours
|
110,000
|
140,000
|
Assume the following information for Product 1 in 2015:
|
|
Department 1
|
Department 2
|
|
Direct labor
|
$12,176
|
$3,376
|
|
Direct labor hours
|
761
|
211
|
|
Machine hours
|
1,030
|
820
|
4. Using the departmental system, allocate overhead to Product 1 (round overhead rate(s) to two decimal places).
Question 5 Assume that X Company has decided to switch to an activity-based costing allocation system. It has identified three activities with the following budgeted costs and cost drivers for 2015:
|
Activity
|
Budgeted cost
|
Cost driver
|
|
Purchasing
|
$33,600
|
4,600 purchase orders
|
|
Assembly
|
$84,000
|
89,200 parts
|
|
Packaging
|
$50,400
|
11,500 finished units
|
5. Assume that 569 unis of Product 1 were finished in 2015, requiring 1,274 parts and 42 purchase orders. Using the activity-based costing system, allocate overhead to Product 1 (round overhead rate(s) to two decimal places).