Question

Beta Company produced 2,000 units of product X and 800 units of product Y. Product X uses $3 of direct materials (DM) per unit and $20 of direct labor (DL) per unit. Product Y uses $5 of direct materials (DM) per unit and $30 of direct labor (DL) per unit. Total indirect overhead costs (OH) were $32,000, allocated based on direct labor dollars. What are the allocated overhead costs for X and Y?

Answer 1

Product X = $20,000

Product Y = $12,000

Step-by-step explanation:

First determine the total direct labor costs :

Product X ( $20 × 2,000) = $40,000

Product Y ( $30 × 800) = $24,000

Total Labor Cost = $64,000

Use the total direct labor costs to find the overhead application rate as follows :

Predetermined Overhead rate = $32,000 ÷ $64,000

= $0.50

Then Allocate this to Product X and Product Y

Product X ($0.50 × $40,000) = $20,000

Product Y ($0.50 × $24,000) = $12,000