Question

The Oakman Company (see Short Exercise S19-1) has refined its allocation system by separating manufacturing overhead costs into two cost pools—one for each department. The estimated costs for the Mixing Department, \(510,000, will be allocated based on direct labor hours, and the estimated direct labor hours for the year are 170,000. The estimated costs for the Packaging Department, \)300,000, will be allocated based on machine hours, and the estimated machine hours for the year are 40,000. In October, the company incurred 38,000 direct labor hours in the Mixing Department and 10,000 machine hours in the Packaging Department.

Requirements

2. Determine the total amount of overhead allocated in October.

Short answer

Total overhead in October is $189,000.

Step-by-step solution

Overhead cost or mixing department

$$\begin{gathered} \mathbf{overhaed}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{in}\mathbf{}\mathbf{october}\mathbf{}\mathbf{=}\mathbf{}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{}\mathbf{direct}\mathbf{}\mathbf{labor}\mathbf{}\mathbf{hour}\mathbf{}\mathbf{in}\mathbf{}\mathbf{october} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{\times }\mathbf{38}\mathbf{,}\mathbf{000} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{114}\mathbf{,}\mathbf{000} \end{gathered}$$

Overhead cost or packaging department

$$\begin{gathered} \mathbf{overhaed}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{in}\mathbf{}\mathbf{october}\mathbf{}\mathbf{=}\mathbf{}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{}\mathbf{direct}\mathbf{}\mathbf{machine}\mathbf{}\mathbf{hour}\mathbf{}\mathbf{in}\mathbf{}\mathbf{october} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{7}\mathbf{.}\mathbf{5}\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{75}\mathbf{,}\mathbf{000} \end{gathered}$$

Total Overhead allocated in October

$$\begin{gathered} \mathbf{total}\mathbf{}\mathbf{overhaed}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{in}\mathbf{}\mathbf{october}\mathbf{}\mathbf{=}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{m}\mathit{i}\mathit{x}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{d}\mathit{e}\mathit{p}\mathit{a}\mathit{r}\mathit{t}\mathit{m}\mathit{e}\mathit{n}\mathit{t}\mathbf{}\mathbf{+}\mathbf{overhead}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{for}\mathbf{}\mathbf{packing}\mathbf{}\mathbf{department}\mathbf{} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{114}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{75}\mathbf{,}\mathbf{000} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{189}\mathbf{,}\mathbf{000} \end{gathered}$$