Problem:
A company has three products and three main departments that consume resources: Design, production and quality assurance. The following information was collected for the three departments:
|
|
|
Use of Cost Driver by Product
|
|
Department
|
Cost Driver
|
Variable Manufacturing Overhead
|
Product A
|
Product B
|
Product C
|
|
Design
|
Consultant Hours
|
$54,000
|
20
|
15
|
5
|
|
Production
|
Machine Hours
|
$183,000
|
425
|
400
|
375
|
|
Quality Assurance
|
Tests
|
$75,000
|
30
|
8
|
2
|
|
Total
|
|
$312,000
|
|
|
|
Required:
Question 1: Compute the manufacturing overhead allocated to each product for the year using the simple costing system using machine hours as the allocation base.
Question 2: Compute the manufacturing overhead allocated to each produce for the year using the department-based manufacturing overhead rates.
Note: Please show how you came up with the solution.