In: Accounting
Sheffield Co. incurs $157000 of overhead costs each year in its three main departments, setup ($9700), machining ($115000), and packing ($32300). The setup department performs 40 setups per year, the machining department works 4000 hours per year, and the packing department packs 600 orders per year. Information about Sheffield’s 2 products is as follows:
Product One | Product Two | |
Number of setups | 20 | 20 |
Machining hours | 900 | 3100 |
Orders packed | 140 | 460 |
If machining hours are used as a base, how much overhead is
assigned to Product One each year?
$35325 |
$78500 |
$57500 |
$40150 |
Total Overhead = $157,000
Machine hour base for product 1 = Product one machine hours/Total Machine hours
= 900/(900+3100)
= 900/4000
= 0.225
Overhead allocation = $157,000*0.225 ; $35,325 Option 1 is the right answer