Question

1. Tackett makes handheld calculators in two models—basic and professional—and wants to refine its costing system by allocating overhead using department rates. The estimated $1,053,000 of manufacturing overhead has been divided into two cost pools: Assembly Department and Packaging Department. The following data have been compiled:

	Assembly Department		Packaging Department		Total
Overhead Costs	$ 570,000		$          483,000		$ 1,053,000
Machine Hours
Basic Model	135,500	MHr	24,500	MHr	160,000	MHr
Professional Model	244,500	MHr	180,500	MHr	425,000	MHr
Total	380,000	MHr	205,000	MHr	585,000	MHr

Compute the predetermined overhead allocation rates using machine hours as the allocation base for the Assembly Department and direct labor hours for the Packaging Department.

Begin by writing the formula to calculate the predetermined overhead​ (OH) allocation rate. Then enter the amounts to compute the allocation rate for each department. ​(Abbreviation used: Qty​ = quantity. Enter the allocation rates to the nearest​ cent.)

		/		=	Predetermined OH Allocation Rate
Assembly		/		=
Packaging		/		=

How much overhead is allocated to the basic​ model? To the professional​ model?

Begin by selecting the formula to allocate overhead​ (OH) costs. ​(Abbreviation used: Qty​ = quantity.)

X

=

Allocated mfg. overhead costs

Compute the total overhead allocated to the basic​ model, and then compute the total overhead allocated to the professional model.

	Assembly Department		Packaging Department		Total
Direct Labor Hours
Basic Model	30,000	DLHr	80,000	DLHr	110,000	DLHr
Professional Model	90,000	DLHr	610,000	DLHr	700,000	DLHr
Total	120,000	DLHr	690,000	DLHr	810,000	DLHr

Round allocation rates to two decimal places and allocated costs to whole dollars.

Answer 1

1.

	Total Estimated Overhead	/	Estimated Volume of Allocation Base		Predetermined Overhead Allocation Rate
Assembly	$ 570,000	/	380,000 MHr	=	$ 1.50	per MHr
Packaging	$ 483,000	/	690,000 DLHr	=	$ 0.70	per DLHr

2.

	Assembly			Packaging			Overhead Cost Allocated
Basic Model	135,500 MHr	$ 1.50	$ 203,250	80,000 DLHr	$ 0.70	$ 56,000	$ 259,250
Professional Model	244,500 MHr	1.50	366,750	610,000 DLHr	0.70	427,000	793,750