Sheffield Co. incurs $157000 of overhead costs each year in its three main departments, setup ($9700),...

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

Expert Solution

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

ekkarill92 answered 3 years ago

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