Figure 4-6
The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data:

-Refer to Figure 4-6. How much overhead is applied to the planes?

Question

Figure 4-6
The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data:
 
-Refer to Figure 4-6. How much overhead is applied to the planes?

Quizplus · Accepted Answer

First, we need to calculate the overhead rates for each department. To do this, we divide the total overhead costs for each department by the total machine hours for Molding and the total direct labor hours for Finishing:

Molding overhead rate = $675,000 / 45,000 MH = $15 per MH
Finishing overhead rate = $525,000 / 35,000 DLH = $15 per DLH

Next, we need to determine how much overhead to apply to each product. To do this, we simply multiply the overhead rate by the amount of machine hours used by planes and the amount of direct labor hours used by race cars:

Planes:

Overhead applied to planes = 15 per MH x 4,000 MH = $60,000

Race cars:

Overhead applied to race cars = 15 per DLH x 50,000 DLH = $225,000

Therefore, the overhead applied to the planes is $60,000, and the best choice is C.

Figure 4-6 The Fast & Furious Company Produces Two Products: Toy Planes