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Calculation of Cost Allocation of a Product with Direct Labor Hours as the Cost Driver

Question

X Company has two production departments, X and Y. Listed below are budgeted information for the two departments, and actual information for one of its products, product 1:

Department X                         All Products                  Product 1

                         Overhead                                 $7,200,000                          -

                        Direct labor                                 $800, 000                       $13,776

                              Direct labor hours                           50,000                           861

                              Machine hours                               120,000                          1040

                              Units produced                              53,000                            590

                            Department Y  

                              Overhead                                 $1,900,000                          -

                        Direct labor                                 $640, 000                       $2,000

                              Direct labor hours                           40,000                          125

                              Machine hours                              140,000                          810

                              Units produced                              50,000                            590

Using a plant wide allocation system with direct labor hours as the cost driver, what was the allocation to product 1.

Summary: This question belongs to accounting and discusses about budgeted information and to calculate cost allocation for a product.

Total word count: 20

 

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