Question

makes handheld calculators in two​ models: basic and professional. Aragon estimated $ 819 comma 500 of manufacturing overhead and 745 comma 000 machine hours for the year. The basic model actually consumed 260 comma 000 machine​ hours, and the professional model consumed 485 comma 000 machine hours. Requirements 1. Compute the predetermined overhead allocation rate using machine hours​ (MHr) as the allocation base. 2. How much overhead is allocated to the basic​ model? To the professional​ model?

Answer 1

Answer:

Overhead absorption rate = $1.1 per machine hour

Allocated overhead:

Basic model = $286,000

Professional model = $533,500

Explanation:

Under absorption costing product are cost using the full cost which is the variable cost plus the fixed production overhead.

Overheads are charged to the units produced by using a predetermined rate called Overhead absorption rate.

Overhead absorption rate (OAR) = Budgeted Overhead for the period / Budgeted machine hours

OAR = $819,500/745,000 machine hours

OAR = $1.1 per machine hour

Allocate overhead to products

Allocated overhead = OAR× actual machine hours used for production

Basic model = $1.1 ×260,000 = $286,000

Professional model = $1.1 × 485,000 = $533,500