Daffodil Company produces two products, Flower and Planter. Flower is a high-vol

Question

Daffodil Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20,000 units annually. Planter is a low-volume item totaling only 6,000 units per year. Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual manufacturing overhead costs are $640,000. Sphere uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of



(a) $20.00.



(b) $24.61.



(c) $40.00.



(d) Need more information to compute.

Explanation / Answer

Flower is a high-volume item totaling 20,000 units annually , one hour of direct labor , 20,000 labour hours

Planter is a low-volume item totaling only 6,000 units per year , 2 hours 12000

total overhead costs are $640,000

overhead per lbour hour = $640,000/ 32000= 20

so for Each unit of Planter overhead will be

= (overhead per lbour hour*12000)/total units

= (20* 12000)/6,000

= 40

C is the answer

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