Question

The Antigone Company uses machine hours to apply overhead to the Machining Department and direct labor...

The Antigone Company uses machine hours to apply overhead to the Machining Department and direct labor hours in the Assembly Department. The following information is available for the current year:

Machining Assembly
Estimated overhead $ 420,000 $ 540,000
Estimated activity:
Machine hours 70,000 15,000
Direct labor hours 40,000 60,000
Actual activity:
Machine hours 64,500 12,500
Direct labor hours 35,000 63,200


What is the total amount of overhead assigned to the product?

$860,000

Business   Accounting   
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Answer #1

Predetermined overhead rate = Estimated overhead ÷ Estimated allocation base

Predetermined rate for Machining Department = Estimated overhead ÷ Estimated machine hours = $420,000 / 70,000 = $6 per machine hour

Predetermined rate for Assembly Department = Estimated overhead ÷ Estimated direct labor hours = $540,000 / 60,000 = $9 per direct labor hour

The total amount of overhead that will be assigned to the product = (64,500 Actual machine hours × $6 per machine hour) + (63,200 Actual direct labor hours × $9 per direct labor hour) = $955,800

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