ACC 212 - Handout 3 Assigning Overhead Costs 1) Plantwide Overhead Rate 2) Departmental Overhead Rate 3) Activity Based Costing Example 1 (Plantwide Overhead Rate): A business needs to allocate factory overhead to a product. The direct material cost of the product is $200 and the direct labor cost is $150. The business applies factory overhead based on direct labor costs. Assume the business estimated factory overhead cost to be $350,000 and direct labor costs to be $250,000 for the year. The business can sell the product for $800. Example 2 (Activity Based Costing): A corporation reports the following the estimated overhead costs/quantity relate to all products the company produces) Activity Mixing Cooking Packaging Overhead Cost Driver Total Quantity $50,000 Direct Labor hours 4,000 hours $30,000 Machine Hours 2,500 hours $25,000 Boxes 50,000 boxes The business produced 30,000 boxes of cookies. Additional information related to the 30,000 boxes: S20,000 Direct Material Direct Labor 22,500 Mixing Cooking Packaging 2,000 hours 1,250 hours 30,000 boxes ACC 212_- Handout 5