Willey Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following: Factory manager's salary $210,000 Factory utility cost 70,000 Factory supplies 20,000 Total overhead costs $300,000 Willey uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows: Cups 300 Hours Tablecloths 750 Bottles 950 Total machine hours 2,000 Required: Allocate the budgeted overhead costs to the products.

Question

Business

Maya Branch

Today, 04:44

Willey Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following: Factory manager's salary $210,000 Factory utility cost 70,000 Factory supplies 20,000 Total overhead costs $300,000 Willey uses machine hours as the cost driver to allocate overhead costs. Budgeted machine hours for the products are as follows: Cups 300 Hours Tablecloths 750 Bottles 950 Total machine hours 2,000 Required: Allocate the budgeted overhead costs to the products.

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Corinne Logan · Answer 1

Cups = $45,000

Tablecloths = $1,12,500

Bottles = $1,42,500

Explanation:

Given that,

Factory manager's salary = $210,000

Factory utility cost = 70,000

Factory supplies = 20,000

Overhead allocation rate:

= Budgeted Overhead : Budgeted Base of allocation

= Total overhead costs : Total machine hours

= $300,000 : 2,000

= $150 per machine hour

Cups:

Allocated cost = Allocation rate * Weight of base

= $150 * 300

= $45,000

Tablecloths:

Allocated cost = Allocation rate * Weight of base

= $150 * 750

= $1,12,500

Bottles:

Allocated cost = Allocation rate * Weight of base

= $150 * 950

= $1,42,500