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Solution Library
Cost Allocation of a Product with Machine Hours as the Cost Driver
Question
X Company has two production departments, X and Y. Listed below are budgeted information for the two departments, and actual information for one of its products, product 1:
Department X All Products Product 1
Overhead $7,200,000 -
Direct labor $800, 000 $13,776
Direct labor hours 50,000 861
Machine hours 120,000 1040
Units produced 53,000 590
Department Y
Overhead $1,900,000 -
Direct labor $640, 000 $2,000
Direct labor hours 40,000 125
Machine hours 140,000 810
Units produced 50,000 590
Using a plant wide allocation system with machine hours as the cost driver in department X and direct labor hours as cost driver in department Y. what was the allocation to product 1.
Summary: This question belongs to accounting and discusses about budgeted information and to calculate cost allocation for a product.
Total word count: 20
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