Brisbane, Inc, a leading manufacturer of car spare parts, divided its manufacturing process into two
Departments - Production and Packing
The estimated overhead costs for the Production and Packing
departments amounted to $14,000,000 and $20,000,000, respectively. The company produces two types of parts - Part 1 and Part 2. The total estimated labor hours for the year were 40,000, and estimated machine hours were 35,000. The Production department is mechanized, whereas the Packing department is labor oriented. Calculate the amount of manufacturing overhead costs allocated to Part 1.
Production Packing
Machine hours Labor hours
Part 1 10,000 30,000
Part 2 25,000 10,000
35,000 40,000
What will be an ideal response
Calculation of departmental predetermined overhead allocation rates:
Production Packing
Estimated overhead cost $14,000,000 $20,000,000
Estimated machine hours 35,000
Estimated labor hours 40,000
Predetermined overhead allocation rate $400 $500
Part 1
Manufacturing overhead — Production: 10,000 machine hours x $400 $4,000,000
Manufacturing overhead — Packing: 30,000 labor hours x $500 15,000,000
Total manufacturing overhead allocated: 19,000,000
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What will be an ideal response?