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Smelly Perfume Company manufactures and distributes several different products. They currently use a plant-wide allocation method for allocating overhead at a rate of $7 per direct labor hour. Cindy is the department manager of Department C which produces Products J and P. Diane is the department manager of Department D which manufactures Product X. The product costs (per case of 24 bottles) and other information are as follows:





J P X

Direct materials $100.00 $ 72.00 $48.00

Direct labor 42.00 31.50 12.00

Overhead 28.00 21.00 14.00

$170.00 $124.50 $74.00



Machine hours 4 2 3

Number of cases (per year) 300 500 600





1. If Smelly changes its allocation basis to machine hours, what is the total product cost per case for Product P?

a. $163.50

b. $144.00

c. $138.15

d. $117.15

Respuesta :

cancinodavidq

Answer:

 Option D (117.15) is the correct answer.

Explanation:

 Part A:

Total Overhead = 28*300 + 21*500 + 14*600 = 27300

 

Total Machine Hours = 4*300 + 2*500 + 3*600 = 4000

Overhead Rate Per Machine Hour = Total Overhead/Total Machine Hours = 27300/4000 = 6.825

Product Cost for P = Direct Material + Direct Labor + Overhead Rate Per Machine Hour*Estimated Machine Hours for P = 72 + 31.50 + 6.825*2 = 117.15

 Option D (117.15) is the correct answer.

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