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Fill in the Blank QuestionFill in the blank question.A company has the following activities and costs: machine setup of $5,000 per setup and factory services of $100 per square foot.  If product 1 uses 2 setups and has 10,000 square feet, overhead allocated to product 1 is $.

Question

Fill in the Blank QuestionFill in the blank question.A company has the following activities and costs: machine setup of 5,000persetupandfactoryservicesof5,000 per setup and factory services of 100 per square foot.  If product 1 uses 2 setups and has 10,000 square feet, overhead allocated to product 1 is $.

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Solution

To calculate the overhead allocated to product 1, we need to add the cost of machine setup and the cost of factory services.

  1. Calculate the cost of machine setup: The cost of one setup is 5,000.Product1uses2setups.So,thetotalcostformachinesetupis2setups5,000. Product 1 uses 2 setups. So, the total cost for machine setup is 2 setups * 5,000/setup = $10,000.

  2. Calculate the cost of factory services: The cost of factory services is 100persquarefoot.Product1has10,000squarefeet.So,thetotalcostforfactoryservicesis10,000squarefeet100 per square foot. Product 1 has 10,000 square feet. So, the total cost for factory services is 10,000 square feet * 100/square foot = $1,000,000.

  3. Add the cost of machine setup and the cost of factory services to get the total overhead allocated to product 1: 10,000(machinesetup)+10,000 (machine setup) + 1,000,000 (factory services) = $1,010,000.

So, the overhead allocated to product 1 is $1,010,000.

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