Question

Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $3 per labor-hour. Strawberry and vanilla flavors are produced in Department SV. Chocolate is produced in Department C. Sven manages Department SV and Charlene manages Department C. The product costs (per thousand gallons) follow:

Strawberry Vanilla Chocolate
Direct labor (per 1,000 gallons) $ 762 $ 837 $ 1,137
Raw materials (per 1,000 gallons) 812 512 612
Requirement 1:
If the number of hours of labor per 1,000 gallons is 62 for strawberry, 68 for vanilla, and 100 for chocolate, compute the total cost of 1,000 gallons of each flavor using plantwide allocation.

Answer 1

Allocated MOH= $690

Step-by-step explanation:

Giving the following information:

Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $3 per labor-hour.

The number of hours of labor per 1,000 gallons is 62 for strawberry, 68 for vanilla, and 100 for chocolate.

We already have an estimated overhead rate. All we have to do is allocate the overhead using the following formula:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 3* ( 62 + 68 + 100)= 3*230= $690