Question

Company Z has two departments: fabrication, which uses machine hours as its allocation base, and finishing, which uses direct labor cost. Fabrication estimates $30,000 in Fixed MOH prior to the period while finishing estimates $8,100 in fixed MOH. Fabrication applies VMOH at $10 per machine hour, and finishing applies VMOH at $1.20 per Direct Labor Dollar. The companywide direct labor rate is $18/hour (consider this an actual rate for calculation). Fabrication estimates using 2,500 machine hours and 700 direct labor hours Finishing estimates using 400 machine hours and 1,500 direct labor hours.

If Company Z uses departmental rates and a job requires 16 machine hours and 12 direct labor hours in fabrication, and 10 machine hours and 25 direct labor hours in finishing, how much MOH in total is applied to the job (round to nearest cent)?

Answer 1

Department overhead
Particulars	Fabrication	Finishing
Estimated OH	30,000	8,100
/ Expected cost driver	2,500	1,500
FOH per hour	12.00	5.40
Add: VOH per hour	10.00	1.20
Rate per hour	22.00	6.60

Overhead allocation	Job
Machine labor hours	16
× per hour fab. overhead	22.00
Allocated overhead (a)	352.00
Direct labor hours	25
× per hour Dept A overhead	6.60
Allocated overhead (b)	165.00
Total Fixedoverhead allocated	517.00

Answer is $517