Makes handheld calculators in two models: basic and professional. Aragon estimated $ 819 comma 500 of manufacturing overhead and 745 comma 000 machine hours for the year. The basic model actually consumed 260 comma 000 machine hours, and the professional model consumed 485 comma 000 machine hours. Requirements 1. Compute the predetermined overhead allocation rate using machine hours (MHr) as the allocation base. 2. How much overhead is allocated to the basic model? To the professional model?

Overhead absorption rate = $1.1 per machine hour

Allocated overhead:

Basic model = $286,000

Professional model = $533,500

Explanation:

Under absorption costing product are cost using the full cost which is the variable cost plus the fixed production overhead.

Overheads are charged to the units produced by using a predetermined rate called Overhead absorption rate.

Overhead absorption rate (OAR) = Budgeted Overhead for the period / Budgeted machine hours

OAR = $819,500/745,000 machine hours

OAR = $1.1 per machine hour

Allocate overhead to products

Allocated overhead = OAR× actual machine hours used for production

Basic model = $1.1 ×260,000 = $286,000

Professional model = $1.1 × 485,000 = $533,500

a

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