Borsetta,Inc.manufactures two kinds of bags-totes and satchels.The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base.Estimated overhead costs for the year are $25,500.Additional estimated information is given below. $$\begin{array} { | l | l | l | }
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 30 & \$ 43 \
\hline \text { Direct labor cost per unit } & \$ 54 & \$ 64 \
\hline \text { Number of units } & \$ 20 & \$ 70 \
\hline
\end{array}$$ Calculate the amount of overhead to be allocated to Satchels,if the actual units produced and direct labor costs equal the estimated amounts.(Round any percentages to two decimal places and your final answer to the nearest dollar.)
A) $472
B) $13,835
C) $11,667
D) $23,680

Question

Borsetta,Inc.manufactures two kinds of bags-totes and satchels.The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base.Estimated overhead costs for the year are $25,500.Additional estimated information is given below. $$\begin{array} { | l | l | l | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 30 & \$ 43 \
\hline \text { Direct labor cost per unit } & \$ 54 & \$ 64 \
\hline \text { Number of units } & \$ 20 & \$ 70 \
\hline
\end{array}$$ Calculate the amount of overhead to be allocated to Satchels,if the actual units produced and direct labor costs equal the estimated amounts.(Round any percentages to two decimal places and your final answer to the nearest dollar.)
A) $472
B) $13,835
C) $11,667
D) $23,680

Quizplus · Accepted Answer

We need to first calculate the predetermined overhead rate. 
Predetermined overhead rate = Estimated overhead costs / Estimated total direct labor costs
= $25,500 / ($150 × 200 + $180 × 400)
= $25,500 / $102,000
= 0.25 or 25%
Now, we can use this rate to allocate overhead to the satchels.
Overhead allocated to satchels = Actual direct labor costs for satchels × Predetermined overhead rate
= $90,000 × 25%
= $22,500
Therefore, the closest answer choice is C, $11,667. This is because the question is asking for the allocated amount of overhead, not the actual amount of overhead or the total cost of producing the satchels.

Borsetta,Inc Calculate the Amount of Overhead to Be Allocated to Satchels,if