Question

Tom Company incurs overhead costs each year in its three main departments, setup ($70,000), machining ($34,000),...

Tom Company incurs overhead costs each year in its three main departments, setup ($70,000), machining ($34,000), and packing ($56,000). Information about the company's two products is as follows:

Product A1 Product B1 Total
Number of setups 7 33 40
Machining hours 2,800 2,200 5,000
Orders packed 280 220 500
Number of products manufactured 560 440 1,000



If machining hours are used as a base under traditional costing, how much overhead is assigned to Product A1?

Homework Answers

Answer #1
Ans. Calculation of overhead assiged to the product A1, under traditional costing:
Particulars Amt.($)
Setup Costs ($70,000 x 7/40)            12,250
Machine hour costs ($34,000 x 2,800/5,000)            19,040
Packing costs ($56,000 x 280/500)            31,360
     Total overhead costs $        62,650
Overhead cost per unit ($62,650 / 560 ) $        111.88
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