What figures? Expected overhead cost and related data for the two production dep

ID: 2539043 • Letter: W

Question

What figures?

Expected overhead cost and related data for the two production departments follow.

Direct materials $ 260,000 Direct labor Fabricating department (6,500 DLH × $28 per DLH) $ 182,000 Assembly department (16,000 DLH × $25 per DLH) $ 400,000 Machine hours Fabricating department 14,400 MH Assembly department 20,800 MH Chapte 4 Homework 4 Lavail produces lamps and home lighting atures ts most popuiar product is a brushed aluminum desklamp. This lamp is made from nfomation related to the 21.000 des amps produced annually follows opartM(11,2ed.DL.. $25 per 8409 Expected overhead cost and related date for the fwo production depmnt o Required the sluminum Comp te this question by enterin9 your answeinue tas Oelow. B0

Explanation / Answer

Solution:

Part 1 -- Plant wide overhead rate based on direct labor hours

Predetermined Plant Wide Overhead Rate

- Overheads are the indirect manufacturing costs incurred on the making of product. These costs are not directly traceable with the production volume because it incurred for a period or in lum sum amount.

- Generally, the overhead costs are apply to the production department on predetermined basis.

- Predetermined Overhead Rate is the rate which is used to apply manufacturing overhead to products or job orders.

- Normally, it is calculated at the beginning of the period.

- It is calculated by dividing the estimated factory overhead cost by an allocation base (or suitable basis).

- Allocation bases may be direct labor hours, direct labor costs, machine hours etc..

Predetermined Overhead Rate = Estimated Manufacturing Overhead Cost / Estimated Allocation Base

Plant-wide overhead rate means predetermined overhead rate of plant as a whole.

Estimated Total Manufacturing Overhead

($340,000 + $415,000)

$755,000

$1.66 per direct labor hour

($755,000 / 455,000)

Estimated Total Direct Labor Hours

(150,000 + 305,000)

455,000 DLHs

Plantwide Overhead Rate = $1.66 per direct labor hour (Rounded to 2decimal places)

Part 2 – Total Manufacturing Cost per unit

Direct materials

$260,000

Direct Labor ($182,000 + $400,000)

$582,000

Applied Manufacturing Overhead

Fabricating Dept. (6500 DLH * $1.66)

$10,790

Assembly Dept. (16000 DLH * $1.66)

$26,560

Total Manufacturing Costs

$879,350

Units Produced

21000

Manufacturing Cost per unit

$41.87

Part 3 – Departmental Overhead Rate

Department

Fabricating

Assembly

Overhead Cost

$340,000

$415,000

Allocation Base

Machine Hours for Fabricating Dept.

156,000 MHs

Direct Labor Hours for Assembly

305,000 DLHs

Overhead Rate (Overhead Cost / Allocation Base)

$2.18

$1.36

Departmental Overhead Rate

Fabricating

$2.18

Per machine hour

Assembly

$1.36

Per direct labor hour

Part 4 – Manufacturing Cost per unit

Direct materials

$260,000

Direct Labor

Fabricating Dept.

$182,000

Assembly Dept.

$400,000

Total Direct Labor Cost

$582,000

Applied Manufacturing Overhead

Fabricating Dept. (14,400 MHs * $2.18)

$31,392

Assembly Dept. (16000 DLH * $1.36)

$21,760

Total Applied Overhead Cost

$53,152

Total Manufacturing Costs

$895,152

Units Produced

21000

Manufacturing Cost per unit

$42.63

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