A company allocates $7.50 overhead to each unit produced. The company uses a pla

Question

A company allocates $7.50 overhead to each unit produced. The company uses a plantwide overhead rate with direct labor hours as the allocation base. Given the amounts below, how many direct labor hours does the company expect in department 2?

Estimated                                                                 Department 1                                Department 2

Manufacturing Overhead cost                                   $74,358                                         $49,572

Direct labor hours                                                       6,610 DLH                                    ? DLH

Machine hours                                                             700 MH                                        800 MH

Explanation / Answer

Hi,

Please find the answer as follows:

Total Overheads = 74358 + 49572 = 123930

Total Direct Labor Hours = 123930/7.5 = 16524

Direct Labor Hours for Department 2 = 16524 - 6610 = 9914

Answer is 9914

Thanks.

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