Question

Willey Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following: Factory manager’s salary $210,000 Factory utility cost 70,000 Factory supplies 20,000 Total overhead costs $300,000 Willey uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows: Cups 300 Hours Tablecloths 750 Bottles 950 Total machine hours 2,000 Required: Allocate the budgeted overhead costs to the products.

Answer 1

Cups = $45,000

Tablecloths = $1,12,500

Bottles = $1,42,500

Step-by-step explanation:

Given that,

Factory manager’s salary = $210,000

Factory utility cost = 70,000

Factory supplies = 20,000

Overhead allocation rate :

= Budgeted Overhead ÷ Budgeted Base of allocation

= Total overhead costs ÷ Total machine hours

= $300,000 ÷ 2,000

= $150 per machine hour

Cups:

Allocated cost = Allocation rate × Weight of base

= $150 × 300

= $45,000

Tablecloths:

Allocated cost = Allocation rate × Weight of base

= $150 × 750

= $1,12,500

Bottles:

Allocated cost = Allocation rate × Weight of base

= $150 × 950

= $1,42,500