Sasse inc manufactures 2 products hammers and screwdrivers the company has estimated its overhead in the assembling department to be 2. the company produce 3 hammes and 6 screwdrivers each year. each hammer uses 2 parts and ech screwdriver uses 3 parts . how much of the assembly overhead should be allocated to ammer

The answer is: $500,000

Explanation:

In order to allocate overhead cost we will use the overhead cost per part ratio:

Total overhead cost = $2,000,000

Hammers produced = 300,000 x 2 parts per hammer = 600,000 parts

Screwdrivers produced = 600,000 x 3 parts per hammer = 1,800,000 parts

Total parts involved in the production process = 2,400,000 parts

Overhead cost per part = $2,000,000 / 2,400,000 parts = $0.83 per part

Total overhead cost allocated to the production of hammers = 600,000 parts used in hammer production x $0.83 per part = $500,000

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