The total factory overhead for Big Light Company is budgeted for the year at $64

Question

The total factory overhead for Big Light Company is budgeted for the year at $640,000. Big Light manufactures two different products - night lights and desk lamps. Night lights is budgeted for 16,200 units. Each night light requires three hour of direct labor. Desk lamps is budgeted for 15,700 units. Each desk lamp requires two hours of direct labor. Determine the total number of budgeted direct labor hours for year. Determine the single plantwide factory overhead rate using direct labor hours as the allocation base. Round your answer to two decimal places, if necessary. Determine the factory overhead allocated per unit for each product using the single plantwide factory overhead rate calculated in (b). Round your answers to two decimal places, if necessary. Night Lights = Desk Lamps =

Explanation / Answer

Part A)

The total number of budgeted hours can be calculated with the use of following formula:

Total Number of Budgeted Hours = Total Units of Night Lights*Number of Hours Per Night Light + Total Units of Desk Lamp*Number of Hours Per Desk Lamp

Using the values provided in the question, we get,

Total Number of Budgeted Hours = 16,200*3 + 15,700*2 = 80,000 hours

________

Part B)

The single plantwide overhead rate can be calculated with the use of following formula:

Plantwide Overhead Rate = Total Estimated Overhead/Total Budgeted Hours = 640,000/80,000 = $8 per hour

________

Part C)

The factory overhead rate per unit is calculated as follows:

Night Lights = Number of Hours Per Unit*Plantwide Overhead Rate = 3*8 = $24 per unit

Desk Lamps = Number of Hours Per Unit*Plantwide Overhead Rate = 2*8 = $16 per unit

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