Frameworks Artisans creates hand-painted picture frames. The frames are cast fro

Question

Frameworks Artisans creates hand-painted picture frames. The frames are cast from resin in an automated process. Once the casting is done, talented artisans hand-paint one of fifteen designs on each frame. In the final assembly process, a worker inserts the glass pane and attaches the backing to the frame. Frameworks’ budget for the current year, along with the production requirements for two of the frames it produces, are as follows:

                                        Casting    Painting Assembly

Direct labor hours       —           60,000   12,000

Machine hours 28,000     —          800

Manufacturing overhead cost $252,000 $276,000 $48,000

Seasons of Fun Frame:

                                         Casting Painting Assembly

Direct labor hours                —        0.5        0.1

Machine hours                   1           —         0.05

Birth Announcement Frame:

                                        Casting Painting Assembly

Direct labor hours               —         1           0.2

Machine hours                   0.5       —          0.05

Assume that Frameworks Artisans uses a single predetermined overhead application rate based on direct labor hours. Calculate the rate for the current year. (Round overhead rate to 2 decimal places, e.g. 3.54.) **Please explain in detail!

Explanation / Answer

Total direct labor hours = 60,000 + 12,000= 72,000

Total manufacturing overhead = $252,000 + $276,000 + $48,000 = $576,000

Predetermined overhead rate = Budgeted overhead/Budgeted labor hours

Predetermined overhead rate = $576,000/72,000 = $8 per direct labor hour

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