Question
In: Accounting
ABC products makes parts for car engines. three departments (A, B and C) are involved in...
ABC products makes parts for car engines. three departments (A, B and C) are involved in the manufacturing process. The budgets for departmental overhead costs are $25,000, $45,000 and $30,000 respectively, which are allocated to products based on direct labor hours. Estimates of direct labor hours for each department are 5,000 7,000 and 10,000 hours respectively. The business-wide overhead absorption rate is:
a. $3.00
b. $4.55
c. $4.81
d. 5.00
Solutions
Expert Solution
| Correct Option B i.e. $4.55 | |||||
| Department A | Department B | Department C | Total | ||
| Budgeted Overhead | 25,000 | 45,000 | 30,000 | 100,000 | |
| Direct Labour Hour | 5,000 | 7,000 | 10,000 | 22,000 | |
| Overhead absorption rate | 4.55 | (100000/22000) | |||
| (Budgeted Overhead/Direct Labour Hour) | |||||
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