Sanders and Clark Company manufactures two products pillows

Sanders and Clark Company manufactures two products, pillows and comforters. The company has estimated its overhead in the order-processing department to be $480,000. The company produces 50,000 pillows and 80,000 comforters each year. Pillow production requires 25,000 machine hours, comforter production requires 50,000 machine hours. The company places raw materials orders 10 times per month, 2 times for raw materials for pillows and the remainder for raw materials for comforters. How much of the order processing overhead should be allocated to comforters?

Solution

Total No. of Order Placed during Month 10 Order No. of Order for Pillow 2 Order No of Orderr for Comforter (10-2) 8 Order Allocation of Overhead to Comforter will be ( $480000X8/10)= $384,000 Allocation of Overhead to Pillow will be ( $480000X2/10)= $96,000