Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 2018, the following estimates were provided for the coming year:

Machining Assembly

Direct labor-hours 40,000 40,000

Machine-hours 50,000 20,000

Direct labor costs $ 525,000 $ 875,000

Manufacturing overhead costs $ 280,000 $ 360,000

The accounting records of the company show the following data for Job #316:

Machining Assembly

Direct labor-hours 120 75

Machine-hours 45 5

Direct material cost $ 250 $ 125

Direct labor cost $ 300 $ 325

What amount of manufacturing overhead costs will be allocated to Job #316?

Instructions are listed below.

Explanation:

Giving the following information:

Manufacturing overhead costs are allocated based on machine-hours in the Machining Department and based on direct labor-hours in the Assembly Department.

Machining:

Machine-hours = 50,000

Manufacturing overhead costs = $ 280,000

Assembly:

Direct labor-hours = 40,000

Manufacturing overhead costs = $ 360,000

First, we need to calculate the estimated overhead rate for each department:

To calculate the estimated manufacturing overhead rate we need to use the following formula:

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

Machining:

Estimated manufacturing overhead rate = 280,000/50,000 = $5.6 per machine hour

Assembly:

Estimated manufacturing overhead rate = 360,000/40,000 = $9 per direct labor hour

Now, we can allocate overhead to Job 316:

Machining Assembly

Direct labor-hours 120 75

Machine-hours 45 5

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

Machining:

Allocated MOH = 5.6*45 = $252

Assembly:

Allocated MOH = 9*75 = $675