Question
Ryan Corporation manufactures auto steering systems. Prime cost and machine time estimates for one unit of the product for the year follow: Direct materials $
Ryan Corporation manufactures auto steering systems. Prime cost and machine time estimates for one unit of the product for the year follow: Direct materials $ 370 Direct labor ($29/hour) $ 725 Machine hours 20 This product requires 15 hours of direct labor in Department A and 10 hours in Department B. Also, it requires 5 machine hours in Department A and 15 machine hours in Department B. Using output as the activity, the factory overhead costs estimated in these two departments follow: A B Variable cost $ 405,000 $ 250,000 Fixed cost 111,000 180,000 Management expects the firm to produce 1,000 units during the year.
Compute the departmental overhead rate and amount of applied overhead for Department A using direct labor hours as the allocation base and for Department B using machine hours as the allocation base.
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