Question

Xie Company identified the following activities, costs, and activity drivers for 2017 The company manufactures two types of go-karts Deluxe and Basic.

Activity Expected Costs Expected Activity
handling materials $ 625,000 100,000 parts
Inspecting product 900,800 1,500 batches
Processing purchase orders 105,000 700 orders
Paying suppliers 175,000 500 invoices
Ensuring the factory 300,000 40,000 square feet
Designing packaging 75,000 2 models
Required:
1. Compute a single plantwide overhead rate, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours
2. In January 2017, the Deluxe model required 2,500 direct labor hours and the basic model required 6,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate.

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

handling materials $625,000

Inspecting product $900,800

Processing purchase orders $105,000

Paying suppliers $175,000

Ensuring the factory $300,000

Designing packaging $75,000

Total overhead= $2,180,800

First, we need to calculate the plantwide predetermined overhead rate:

Estimated direct-labor hours= 125,000

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 2,180,800/125,000

Predetermined manufacturing overhead rate= $17.45 per direct labor hour

Now, we can allocate overhead:

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

Deluxe= 2,500*17.45= $43,625

Basic= 6,000*17.45= $104,700