Sampson Company manufactures two products, plain and complex.The company has estimated its overhead in the order-processing department to be $480,000.The company produces 50,000 plain and 80,000 complex each year.Plain production requires 25,000 machine hours, complex production requires 50,000 machine hours.The company places raw materials orders 10 times per month, 2 times for raw materials for plain and the remainder for raw materials for complex.How much of the order processing overhead should be allocated to complex?
A)$240,000
B)$320,000
C)$295,386
D)$384,000

Question

Quizplus · Accepted Answer

The overhead should be allocated based on the proportion of orders placed for each product. Plain orders are 2 out of 10 total orders, and complex orders are 8 out of 10. Therefore, 80% of the overhead ($480,000) should be allocated to complex, which is $480,000 * 0.8 = $384,000.

Sampson Company Manufactures Two Products, Plain and Complex