Answer:
Overhead absorption rate = $1.1 per machine hour
Allocated overhead:
<em>Basic model = </em><em>$286,000</em>
<em>Professional model = </em><em>$533,500</em>
Explanation:
<em>Under absorption costing product are cost using the full cost which is the variable cost plus the fixed production overhead.</em>
<em>Overheads are charged to the units produced by using a predetermined rate called Overhead absorption rate</em>.
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
<em>Basic model = $1.1 ×260,000 = </em><em>$286,000</em>
<em>Professional model = $1.1 × 485,000 = </em><em>$533,500</em>
