Question

In addition to the 3D Printers, Jeff’s also manufactures cameras and has two support departments: sales and administration. The table below presents a breakdown of how the service departments’ work is distributed to the manufacturing departments. Sales departments OH is allocated by sales visits made and administration by the number of employees in each department.

	Sales	Administration
Total Costs	$400,000	$500,000
Driver:
Sales	N/A	5
Administration	0	N/A
3D Printers	1,500	400
Cameras	500	95
Total Drivers	2,000	500

2. How much of the service overhead should be allocated to each new 3D Printer (use the number of units transferred to finished goods from the Production Reports – this will be 80,000)?

Answer 1

• All working forms part of the answer
• Question asks only 3D printer and overhead cost allocated to it.
• Cost allocation will be in the following way—

	Overhead (A)	Total drivers (B)	Activity rate per driver (C=A/B)	No. of drivers for 3D printer (D)	Overhead allocated (C x D)
Sales	$400000	2000	$200	1500	$300000
Administration	$500000	500	$1000	400	$400000
TOtal	$900000				$700000

• Hence total overhead allocated to 3D printer = $700,000
• Overhead allocated per unit will be $700000/80000 units = $$8.75