Nott Company manufactures two products, pillows and comforters. The company has estimated its overhead in the order-processing department to be $600,000. The company produces 50,000 pillows and 80,000 comforters each year. Pillow production requires 25,000 machine hours, comforter production requires 50,000 machine hours. The company places raw materials orders 10 times per month, 2 times for raw materials for pillows and the remainder for raw materials for comforters. How much of the order processing overhead should be allocated to comforters?

Question

Quizplus · Accepted Answer

The overhead should be allocated based on the number of orders placed for each product. With 10 orders placed per month, 2 for pillows and 8 for comforters, the comforters are responsible for 8 out of 10 orders, or 80% of the order processing overhead. Therefore, 80% of $600,000 is allocated to comforters, which is $480,000.

Nott Company Manufactures Two Products, Pillows and Comforters