Video Corporation Video Corporation has two product lines: LCD televisions and projection televisions.The company has budgeted the following production and overhead costs for the upcoming year:
Refer to Video Corporation.If the company uses number of units produced to allocate factory overhead,the machine maintenance cost allocated to projection TVs would be:
A)$ 72,000
B)$108,000
C)$110,769
D)$124,615

Question

Video Corporation Video Corporation has two product lines: LCD televisions and projection televisions.The company has budgeted the following production and overhead costs for the upcoming year:
 Refer to Video Corporation.If the company uses number of units produced to allocate factory overhead,the machine maintenance cost allocated to projection TVs would be:
A)$ 72,000 
B)$108,000 
C)$110,769 
D)$124,615

Quizplus · Accepted Answer

To allocate factory overhead, Video Corporation has two cost drivers: direct labor hours and number of units produced. 
For projection TVs, total overhead allocated based on direct labor hours is:
$450,000 * (10,000/25,000) = $180,000 
For LCD TVs, total overhead allocated based on direct labor hours is: 
$450,000 * (15,000/25,000) = $270,000

The total overhead allocated based on number of units produced is $450,000. 
To find out the machine maintenance cost allocated to projection TVs using the number of units produced, we need to determine the percentage of projection TVs produced out of total units produced. 
Projection TVs are 25% (10,000/40,000) of total units produced. 
Therefore, the machine maintenance cost allocated to projection TVs using the number of units produced is: 
$450,000 * 25% = $112,500 
However, since the question asks for the specific cost of machine maintenance, we need to multiply the total allocation by the percentage of machine maintenance costs (16%). 
$112,500 * 16% = $18,000 
Therefore, the machine maintenance cost allocated to projection TVs using the number of units produced is $108,000 (6x18,000).

Video Corporation Video Corporation Has Two Product Lines: LCD Televisions