Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:Machining DepartmentFinishing DepartmentEstimated Manufacturing Overhead by Department$800,000$200,000Trail Running Shoes360,000 machine hours6,000 direct labor hoursRunning Apparel40,000 machine hours34,000 direct labor hoursManufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department. At the end of the year, the following information was gathered related to the production of the trail running shoes and running apparel:Machining DepartmentFinishing DepartmentTrail Running Shoes362,000 hours5,500 hoursRunning Apparel37,000 hours35,000 hoursHow much manufacturing overhead will be allocated to running apparel? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Explanation:

Machining Department Finishing Department Estimated Manufacturing Overhead by Department $800,000 $200,000

Trail Running Shoes 360,000 machine hours 6,000 direct labor hours Running Apparel 40,000 machine hours 34,000 direct labor hours

Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department.

At the end of the year, the following information was gathered related to the production of the trail running shoes and running apparel:

Machining Department Finishing Department Trail Running Shoes 362,000 hours 5,500 hours

Running Apparel 37,000 hours 35,000 hours

How much manufacturing overhead will be allocated to running apparel?

For The Overhead Absorption Rate for Machining Department

Trail Running Shoes = (360,000/360,000+40,000)* $800,000 = $720,000

Running Apparel = (40,000/360,000+40,000)* $800,000 = $80,000

For The Overhead Absorption Rate for Finishing Department

Trail Running Shoes = (6,000/6,000+34,000)* $200,000 = $30,000

Running Apparel = (34,000/6,000+34,000)* $200,000 = $170,000

Therefore the running department would have been allocated ($80,000+$170,000) which is $250,000 during the period.

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