Question

Foxx Company incurs $240000 overhead costs each year in its three main departments, setup ($15000), machining ($165000), and packing ($60000). The setup department performs 40 setups per year, the machining department works 5000 hours per year, and the packing department packs 500 orders per year. Information about Foxx’s two products is as follows: Product A1 Product B1 Number of setups 20 20 Machining hours 1000 4000 Orders packed 150 350 Number of products manufactured 600 400 If machining hours are used as a base under traditional casting, how much overhead is assigned to Product A1 each year?

Answer 1

Allocated MOH= $48,000

Step-by-step explanation:

Giving the following information:

Estimated overhead= $240,000

Product A1 Product B1

Machining hours 1000 4000

First, we need to calculate the predetermined overhead rate:

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

Predetermined manufacturing overhead rate= 240,000/5,000

Predetermined manufacturing overhead rate= $48 per machine-hour

Now, we can allocate overhead:

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

Allocated MOH= 48*1,000

Allocated MOH= $48,000