Question

Ben Gordon, Inc. manufactures 2 products, wheels and seats. The company has estimated its overhead in the assembling department to be $360000. The company produces 300000 wheels and 600000 seats each year. Each wheel uses 2 parts, and each seat uses 3 parts. How much of the assembly overhead should be allocated to wheels?

Answer 1

Answer:

$90,000

Explanation:

We could allocate assembly overhead on the basis of the parts used in the assembly process:

wheels ⇒ 300,000 x 2 parts = 600,000 parts

seats ⇒ 600,000 x 3 parts = 1,800,000 parts

total parts assembled     2,400,000 parts

overhead costs per part assembled = $360,000 / 2,400,000 parts = $0.15 per part

so the overhead allocated to wheels should be = 600,000 parts x $0.15 per part = $90,000