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 $ 190,000 $ 570,000 $ 760,000 Direct material 75,000 150,000 225,000 Direct labor 58,000 137,750 195,750 Overhead: Direct-material related 54,000 Direct-labor related 50,895 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?

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.

A1

Direct material 75,000

Direct labor 58,000

B2

Direct material 150,000

Direct labor 137,750

Overhead:

Direct-material related 54,000

Direct-labor related 50,895

A) Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 225,000/54000= 4.17 per direct material

B) Estimated manufacturing overhead rate= 195,750/50895= 3.85 per direct labor

C) Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH (A1)= 4.17*75000 + 3.85*1377550= 843,087.5

D) Allocated MOH (B2)= 4.17*54000 + 3.85*50895= 421,125.75