Exercise 6-48 (Algo) Two-Stage Cost Allocation and Predetermined Rates (LO 6-3, 4, 5)Channing Corporation makes two products (A1 and B2) that require direct materials, direct labor, and overhead. The following data refer to operations expected for next month. A1B2TotalRevenue$170,000 $510,000 $680,000 Direct material 65,000 130,000 195,000 Direct labor 54,000 128,250 182,250 Overhead: Direct-material related 42,900 Direct-labor related 40,095 Required:Channing uses a two-stage cost allocation system, It uses direct-material costs to allocate direct-materials related overhead and direct-labor costs to allocate direct-labor related overhead costs. a. Compute the direct-material related overhead rate for next month.b. Compute the direct-labor related overhead rate for next month.c. What is the total overhead allocated to product A1 next month?d. What is the total overhead allocated to product B2 next month?

Overhead means an expenses which is not direclty linked with production or sale but indirectly linked. We need to allocate overhead in different product on some predefined basis.

Answered: Exercise 6-48 (Algo) Two-Stage Cost…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 6-48 (Algo) Two-Stage Cost Allocation and Predetermined Rates (LO 6-3, 4, 5)

Channing Corporation makes two products (A1 and B2) that require direct materials, direct labor, and overhead. The following data refer to operations expected for next month.

	A1	B2	Total
Revenue	$	170,000		$	510,000	$	680,000
Direct material		65,000			130,000		195,000
Direct labor		54,000			128,250		182,250
Overhead:
Direct-material related							42,900
Direct-labor related							40,095

Required:

Channing uses a two-stage cost allocation system, It uses direct-material costs to allocate direct-materials related overhead and direct-labor costs to allocate direct-labor related overhead costs.

a. Compute the direct-material related overhead rate for next month.

b. Compute the direct-labor related overhead rate for next month.

c. What is the total overhead allocated to product A1 next month?

d. What is the total overhead allocated to product B2 next month?

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