4. Manufacturing Overhead- over/underapplied LampArt Co. makes specialty table l

Question

4. Manufacturing Overhead- over/underapplied LampArt Co. makes specialty table lamps. Manufacturing overhead is applied to production on a direct labor hours basis. During November, the first month of the company’s fiscal year, $173,250 of manufacturing overhead was applied to Work in Progress Inventory using the predetermined overhead application rate of $15 per direct labor hour.

Activity Budgeted Cost Driver Used Cost
(Cost Driver) (Costs for 2010) as Allocation Base Allocation Rate
Materials handling $ 325,000 Number of parts used $ 0.25 per part
Cutting and lathe work 2,340,000 Number of parts used 1.80 per part
Assembly and inspection 5,000,000 Direct labor hours 25.00 per hour

The following production, costs, and activities occurred during the month of March.
Units Direct Number Direct
Produced Materials Costs of Parts Used Labor Hours
3,800 $142,000 83,600 17,180

Required:
a. Calculate the total manufacturing costs and the cost per unit of the windows produced during the month of March (using the activity – based costing approach).
b. Assume instead that the Galvaset Industries applies manufacturing oeverhead on a direct labor hours basis (rather than using the activity-based costing system previously described). Calculate the total manufacturing cost and the cost per unit of the windows produced during the month of March. (Hint: You will need to calculate the predetermined overhead application rate using the total budgeted overhead costs for 2010).
c. Compare the per unit cost figures calculated in parts a and b. Which approach do you think provides better information for manufacturing managers? Explain you answer.

I really need the answer to part C!

Explanation / Answer

A. $173,250 / $15 = 11,550 Hours

B. Since $173,250 was budgeted and $166,425 was actually incurred:

$173,250 - $166,425 = $6,825 Over-applied

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