Question

Teagan Company uses Departmental Overhead allocation to allocate its manufacturing overhead costs. It has identified two​ departments: Machining​ & Assembly. The Machining department allocates overhead using machine​ hours, and the Assembly department allocates overhead using direct labor hours. It has accumulated the following data for​ 2018: Machining Department estimated manufacturing​ overhead: ​ $670,000 Assembly Department esimated manufacturing​ overhead: ​$450,000 Total estimated overhead costs ​ $1,120,000 Estimated machine hours in the machining​ department: ​ 10,000 hours Estimated direct labor hours in the assembly​ department: ​ 15,000 hours The following shows the amount of machine hours and direct labor hours incurred by Job​ #601 within each​ department: Machining​ Department: 9 Machine Hours 4 DL hours Assembly​ Department: 15 DL hours What is the amount of total allocated overhead for Job?

Answer 1

Answer:

Machining:

Allocated MOH= $603

Assembly:

Allocated MOH= $450

Explanation:

Giving the following information:

Machining:

Allocates overhead using machine-hours

Estimated manufacturing​ overhead: ​ $670,000

Estimated machine-hours= 10,000

Assembly:

Allocates overhead using direct labor hours.

Estimated manufacturing​ overhead: ​$450,000

Estimated direct labor hours= 15,000 hours

First, we need to calculate the estimated manufacturing overhead rate for each department:

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Machining:

Estimated manufacturing overhead rate= 670,000/10,000= $67 per machine hour

Assembly:

Estimated manufacturing overhead rate= 450,000/15,000= $30 per direct labor hour.

Job​ 601:

Machining​ Department: 9 Machine Hours

Assembly​ Department: 15 DL hours

To allocate overhead we use the following formula:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Machining:

Allocated MOH= 67*9= $603

Assembly:

Allocated MOH= 30*15= $450