If Smelly changes its overhead allocation to departmental rates,what is the product cost per case for Product P assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases?
A)$117.15
B)$163.50
C)$121.50
D)$138.15

Question

Quizplus · Accepted Answer

To calculate the product cost per case for Product P, we need to first determine the overhead allocation rate for each department using their respective allocation bases.

Department C: 
Total direct labor hours = 7,500 
Total machine hours = 10,000

Overhead allocation rate based on direct labor hours: $600,000 ÷ 7,500 = $80 per DLH 
Overhead allocation rate based on machine hours: $600,000 ÷ 10,000 = $60 per MH

Department D: 
Total direct labor hours = 5,000 
Total machine hours = 25,000

Overhead allocation rate based on direct labor hours: $900,000 ÷ 5,000 = $180 per DLH 
Overhead allocation rate based on machine hours: $900,000 ÷ 25,000 = $36 per MH

Next, we can calculate the overhead cost for each product using the departmental rates:

Product P: 
Department C - DLH: 1,500 hours x $80 = $120,000 
Department C - MH: 2,500 hours x $60 = $150,000 
Department D - DLH: 1,000 hours x $180 = $180,000 
Department D - MH: 5,000 hours x $36 = $180,000

Total overhead cost for Product P: $630,000

Finally, we can calculate the product cost per case for Product P:

Direct materials and labor cost per case: $100 + $60 = $160 
Overhead cost per case: $630,000 ÷ 5,000 cases = $126

Product cost per case: $160 + $126 = $286

Therefore, the best choice is C.

If Smelly Changes Its Overhead Allocation to Departmental Rates,what Is