Blackwelder Factory produces two similar products - small lamps and desk lamps.

Question

Blackwelder Factory produces two similar products - small lamps and desk lamps. The total plant overhead budget is $640,000 with 400,000 estimated direct labor hours. It is further estimated that small lamp production will require 275,000 direct labor hours and desk lamp production will need 125,000 direct labor hours. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will Blackwelder Factory allocate to small lamp production if actual direct hours for the period is 285,000? a. $456,000 b. $440,000 c. $275,000 d. $285,000

Explanation / Answer

Small Lamps Desk Lamps Total overhead budget $640,000 Direct labor hours 275000 125000 400000 Overhead rate $1.60 Proportion of labour hours 0.6875 0.3125 Actual labour hours would be 285000*0.6875 285000*0.3125 Actual labour hours would be 195937.5 89062.5 285000 195937.50*640000/285000 89062.50*640000/285000 Total Overhead 440000 200000 640000 Blackwelder Factory will allocate $440000 overhead

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