Question

Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming​ year:Machining DepartmentFinishing DepartmentEstimated Manufacturing Overhead by Department​$800,000​$200,000Trail Running Shoes​360,000 machine hours​6,000 direct labor hoursRunning Apparel​40,000 machine hours​34,000 direct labor hoursManufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department. At the end of the​ year, the following information was gathered related to the production of the trail running shoes and running​ apparel:Machining DepartmentFinishing DepartmentTrail Running Shoes​362,000 hours​5,500 hoursRunning Apparel​37,000 hours​35,000 hoursHow much manufacturing overhead will be allocated to running​ apparel? (Round any intermediary calculations to the nearest cent and your final answer to the nearest​ dollar.)

Answer 1

Step-by-step explanation:

Machining Department Finishing Department Estimated Manufacturing Overhead by Department ​$800,000​ $200,000

Trail Running Shoes ​360,000 machine hours​ 6,000 direct labor hours Running Apparel ​40,000 machine hours​ 34,000 direct labor hours

Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department.

At the end of the​ year, the following information was gathered related to the production of the trail running shoes and running​ apparel:

Machining Department Finishing Department Trail Running Shoes ​362,000 hours ​5,500 hours

Running Apparel​ 37,000 hours​ 35,000 hours

How much manufacturing overhead will be allocated to running​ apparel?

For The Overhead Absorption Rate for Machining Department

Trail Running Shoes = (360,000/360,000+40,000)* $800,000 = $720,000

Running Apparel = (40,000/360,000+40,000)* $800,000 = $80,000

For The Overhead Absorption Rate for Finishing Department

Trail Running Shoes = (6,000/6,000+34,000)* $200,000 = $30,000

Running Apparel = (34,000/6,000+34,000)* $200,000 = $170,000

Therefore the running department would have been allocated ($80,000+$170,000) which is $250,000 during the period.