Question

The Oswell Company manufactures products in two departments: Mixing and Packaging. The company was allocating manufacturing overhead using a single plantwide rate of $2.35 with direct labor hours as the allocation base. The company has refined its allocation system by separating manufacturing overhead costs into two post pools one for each department. The estimated costs for the Mixing Department, $598,500, will be allocated based on direct labor hours, and the estimated direct labor hours for the year are 190,000. The estimated costs for the Packaging Department, $96,250, will be allocated based on machine hours, and the estimated machine hours for the year are 25,000. In October, the company incurred 45,000 direct labor hours in the Mixing Department and 6,000 machine hours in the Packaging Department. Read the requirements. Requirement 1. Compute the predetermined overhead allocation rates. Round to two decimal places. Begin by selecting the formula to calculate the predetermined overhead (OH) allocation rate. Then enter the amounts to compute the allocation rate for each department Prodetermined OH allocation rate = Mixing Packaging Requirement 2. Determine the total amount of overhead allocated in October Begin by selecting the formula to allocate overhead costs. Allocated mig overhead costs Compute the overhead allocated in October for each department and the total for both departments. Mixing Packaging Total

Answer 1

Solution 1:

	Estimated Overhead Costs	/	Estimated Allocation base hours	=	Predetermined OH Allocation rate
Mixing	598500		190000		3.15
Packaging	96250		25000		3.85

Solution 2:

	Predetermined OH Allocation rate	*	Actual base hours	=	Allocated Mfg. overhead costs
Mixing	3.15		46000		144900
Packaging	3.85		6000		23100
Total					168000