Question

Munoz 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:

Factory manager’s salary	$	218,450
Factory utility cost		80,000
Factory supplies		20,000
Total overhead costs	$	318,450

Munoz uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows:

Cups		280	Hours
Tablecloths		700
Bottles		950
Total machine hours		1,930

Required

1. Allocate the budgeted overhead costs to the products.

Answer 1

Total Overhead cost	$     3,18,450.00
Total Machine hours	1930
Overhead rate per machine hour	$ 165.00

	Machine hours (A)	Overhead rate (B)	Overhead allocated(A x B)
Cups	280	$ 165.00	$     46,200.00
tablecloths	700	$ 165.00	$ 1,15,500.00
Bottles	950	$ 165.00	$ 1,56,750.00
Total	1930		$ 3,18,450.00