Borsetta, Inc. manufactures two kinds of bags-totes and satchels. The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base. Estimated overhead costs for the year are $25,000. Additional estimated information is given below. $$\begin{array} { | l | r | r | }
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 33 & \$ 44 \
\hline \text { Direct labor cost per unit } & \$ 54 & \$ 62 \
\hline \text { Number of units } & 540 & 370 \
\hline
\end{array}$$ Calculate the amount of overhead to be allocated to Satchels, if the actual units produced and direct labor costs equal the estimated amounts. (Round any percentages to two decimal places and your final answer to the nearest dollar.)
A) $463
B) $13,991
C) $11,007
D) $22,940

Question

Borsetta, Inc. manufactures two kinds of bags-totes and satchels. The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base. Estimated overhead costs for the year are $25,000. Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 33 & \$ 44 \
\hline \text { Direct labor cost per unit } & \$ 54 & \$ 62 \
\hline \text { Number of units } & 540 & 370 \
\hline
\end{array}$$ Calculate the amount of overhead to be allocated to Satchels, if the actual units produced and direct labor costs equal the estimated amounts. (Round any percentages to two decimal places and your final answer to the nearest dollar.)
A) $463
B) $13,991
C) $11,007
D) $22,940

Quizplus · Accepted Answer

First, we need to calculate the plantwide overhead rate, using the estimated overhead costs and estimated direct labor costs for the year:

Plantwide overhead rate = Estimated overhead costs / Estimated direct labor costs 
Plantwide overhead rate = $25,000 / $50,000 
Plantwide overhead rate = $0.50 per direct labor dollar

Next, we need to allocate overhead to each product based on their actual direct labor costs:

Overhead allocated to Totes = Actual direct labor costs for Totes x Plantwide overhead rate 
Overhead allocated to Totes = $25,000 x 0.60 x $0.50 
Overhead allocated to Totes = $7,500

Overhead allocated to Satchels = Actual direct labor costs for Satchels x Plantwide overhead rate 
Overhead allocated to Satchels = $25,000 x 0.40 x $0.50 
Overhead allocated to Satchels = $5,000

Therefore, the amount of overhead to be allocated to Satchels is $5,000, which is closest to option C.

Borsetta, Inc Calculate the Amount of Overhead to Be Allocated to Satchels