Archid, a manufacturer of spare parts, has two production departments: Assembling and Packaging. The Assembling department is machine oriented, while the Packaging department is labor oriented. Estimated manufacturing overhead costs for the year 2015 were $15,000,000 for Assembling and $10,000,000 for Packaging. Calculate departmental wide allocation rates if total estimated machine hours were 30,000 and labor hours were 20,000 for the year.

Question

Quizplus · Accepted Answer

The allocation rate for Assembling is $15,000,000 / 30,000 machine hours = $500 per machine hour. The allocation rate for Packaging is $10,000,000 / 20,000 labor hours = $500 per labor hour.

Archid, a Manufacturer of Spare Parts, Has Two Production Departments