The Big Lite Factory produces two products-small lamps and desk lamps. It has tw

Question

The Big Lite Factory produces two products-small lamps and desk lamps. It has two separate departments, finishing and production. The overhead budget for the finishing department is $550,000, using 500,000 direct labor hours. The overhead budget for the production department is $400,000 using 80,000 direct labor hours. If the budget estimates that a desk lamp will require 1 hours of finishing and 2 hours of production, what is the total amount of factory overhead to be allocated to desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours if 26,000 units are produced?

Explanation / Answer

DL OH rate for Finishing = $550,000/500,000 = $1.10 DL OH Rate for Prodn = $400,000/80,000 = $5 SO Total OH for DeskLamp = No of units*(DL Hrs in Finishing* DLOH rate for Finishing+ DL Hrs in Pro*DL OH rate for Prod) = 26,000*(1*$1.10 + 2*$5) = $288,600

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