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A company incurs $4218500 of overhead each year in three departments: Ordering and Receiving, Mixing, and...

A company incurs $4218500 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2000 purchase orders, works 50000 mixing hours, and performs 1500 tests per year in producing 200000 drums of Goo and 600000 drums of Slime. The following data are available: Department Estimated use of Driver Cost Ordering and Receiving 2000 $1380000 Mixing 50000 1475000 Testing 1500 1363500 Production information for Goo is as follows: Department Estimated use of Driver Ordering and Receiving 400 Mixing 20000 Testing 500 Compute the amount of overhead assigned to Goo.

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Answer #1

Cost per driver = Estimated cost of concerned Department / Total of cost driver

Allocated cost to Goo = Estimated use of driver x cost per driver of Concerned Dept

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