Question

Willey Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following:

Allocate the budgeted overhead costs to the products.

$210,000 70,000 Factory manager's salary Factory utility cost Factory supplies 20,000 $300,000 Total overhead costs Willey uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows: 300 Hours Cups Tablecloths 750 950 Bottles 2,000 Total machine hours

Answer 1

Product	Allocation Rate	x	Weight of Base	=	Allocated Cost
Cups	$ 150		300 machine hrs.		$ 45,000
Tablecloths	150		750		112,500
Bottles	150		950		142,500
Total			2,000 hrs		$ 300,000

Allocation rate = Total Overhead Costs / Total Machine Hours = $ 300,000 / 2,000 = $ 150 per machine hour.