Exercise 1 Oro Company has two departments with the following production data. I
ID: 2337555 • Letter: E
Question
Exercise 1 Oro Company has two departments with the following production data. It has historically used a single- plant-wide overhead rate based on direct labor cost. Welding Fabrication Manufacturing overhead costs Direct labor cost Direct labor hours Machine hours 80,000 $ 35,000 $ 3,500 100 120,000 8,750 875 2,UUU a) Single Plant-Wide Overhead Rate Compute departmental overhead rates. Assume welding applies overhead using direct labor hours and fabrication using machine hours. b) Departmental Overhead Rate - Welding per DL hr c Departmental Overhead Rate - Fabrication per mach. HrExplanation / Answer
(a) – Single Plant-Wide Overhead Rate
Single Plant-Wide Overhead Rate = Total Manufacturing Overhead Costs / Total Direct Labor Costs
= [$80,000 + 120,000] / [$35,000 + 8,750]
= $200,000 / 43,750
= 457.14 % of Direct Labor Costs
(b) - Departmental Overhead Rate – Welding
Departmental Overhead Rate – Welding = Manufacturing Overhead Cost / Total Direct Labor Hours
= $80,000 / 3,500 Direct Labor Hours
= $22.86 per DL hr
(c) - Departmental Overhead Rate – Fabrication
Departmental Overhead Rate – Fabrication = Manufacturing Overhead Cost / Total Machine Hours
= $120,000 / 2,000 Machine Hours
= $60 per Machine Hours
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