Question

Magglio Company produces two products, Bop and Mop in a small manufacturing plant which had total manufacturing overhead of $52,000 in June and used 800 direct labor hours. The factory has two departments, Preparation, which incurred $32,000 of manufacturing overhead, and Processing which incurred $20,000 of manufacturing overhead. Preparation used 500 hours of direct labor and Processing used 200 machine hours. During June, 400 direct labor hours were used in making 100 units of Bop, and 400 were used in making 100 units of Mop. Assume that instead of using a plant wide overhead rate, Magglio used departmental rates based on direct labor hours for the Preparation Department and machine hours for the Processing Department. Assume that Bop used 225 direct labor hours and Mop used 275 direct labor hours in the Preparation Department. Also, assume that Bop used 120 machine hours and Mop used 80 machine hours in the Processing Department. The overhead costs assigned to each unit of Bop and Mop were:

Select one: A. $ 64.00 to Bop and $100.00 to Mop

B. $256.00 to Mop and $256.00 to Bop

C. $301.80 for Bop and $326.20 for Mop

D. $264.00 to Bop and $256.00 to Mop

Answer 1

Deptt Oh rate:
Preparation:
Overheads cost		32000
Divide: DLH		500
OH rate per DLH		64
Processing:
Overheads cost		20000
Divide: MH		200
OH rate per MH		100
Overheads allocated and OH cost per unit:
			BOP	MOP
DLH used of Preparation			225	275
MH used of Processing			120	80
Oh of Prepration @64			14400	17600
Oh of Processing @100			12000	8000
Total Overheads			26400	25600
Divide: Number of untis			100	100
OH cost per unit			264	256
Answer is D. 264 of BOP and 256 to MOP