Everlast Co. manufactures a variety of drill bits. The company's plant is partially automated. The budget for the year includes $432,000 payroll for 4,800 direct labor-hours. Listed below is cost driver information used in the product-costing system:

Overhead Cost Pool

Budgeted Overhead

Cost Driver

Estimated Cost Driver Level

Machine setups

$120,000

# of setups

120 setups

Materials handling

104,400

# of barrels

8,700 barrels

Quality control

264,000

# of inspections

1,100 inspections

Other overhead cost

144,000

# of machine hours

12,000 machine hours

Total overhead

$632,400

A current product order has the following requirements:

Machine setups

8 setups

Materials handling

606 barrels

Quality inspections

80 inspections

Machine hours

830 machine hours

Direct labor hour

336 hours

What is the total manufacturing overhead for the current product order if the firm uses a plantwide rate based on direct labor-hours?

$9,960

$44,268

$43,741

$30,240

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facundobuzzetti facundobuzzetti · Answer 1 · 2020-02-06T11:40:56+01:00

Answer:

Allocated MOH= $44,268

Explanation:

Giving the following information:

Direct labor:

The budget for the year includes $432,000 payroll for 4,800 direct labor-hours.

Total estimated overhead= $632,400

Actual Direct labor hour (for an order)= 336 hours

First, we need to calculate the plantwide estimated manufacturing overhead rate:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 632,400/4,800= $131.75

Now, we can allocate the overhead based in actual direct labor hours:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 131.75*336= $44,268