Question

Heedy Winery accumulates the costs incurred in the labeling process in an activity cost pool. Costs for the labeling process are estimated to be $320,000, and the winery expects to generate 640,000 labels for the coming year. Production for its top-selling wine is estimated at 160,000 bottles. How much overhead from the labeling process will be allocated to this particular variety of wine

Answer 1

$80,000

Step-by-step explanation:

The computation of allocation labeling expenses is shown below:-

Overhead rate = Labeling process cost ÷ Labels generated

$320,000 ÷ $640,000

= $0.5 per label

Allocation labeling expenses = Wine estimated bottles × Overhead rate

= $160,000 × $0.5

= $80,000

Therefore for computing the allocation labeling expenses we simply applied the above formula.