The total factory overhead for Big Light Company is budgeted for the year at $80

Question

The total factory overhead for Big Light Company is budgeted for the year at $800,000. Big Light manufactures two different products - night lights and desk lamps. Night lights is budgeted for 30,000 units, each unit requiring two hours of direct labor per unit. Desk lamps, on the other hand, is budgeted for 40,000 units, each unit requiring two and a half hours of direct labor per unit. Determine (a) the total number of budgeted direct labor hours for year, (b) the single plantwide factory overhead rate using direct labor hours as the allocation base, and (c) the factory overhead allocated per unit for each product using the single plantwide factory overhead rate using direct labor hours as the allocation base.

Explanation / Answer

a) the total number of budgeted direct labor hours for year = 30000*2+40000*2.5 = 160000 hrs

b) single plantwide overhead rate = 800000/160000 = $ 0.5 / hr

c) he factory overhead allocated per unit

for night lights = 2*0.5 = $1 per unit

for Desk lamps = 2.5*0.5 = $1.25 per unit

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