Laval produces lamps and home lighting fixtures. Its most popular product is a b

Question

Laval produces lamps and home lighting fixtures. Its most popular product is a brushed aluminum desk lamp. This lamp is made from components shaped in the fabricating department and assembled in its implementation department. Information related to the 27,000 desk lamps produced annually follow.

Direct materials $ 270,000

Direct labor

Fabricating department (6,000 DLH × $21 per DLH) $126,000

Implementation department (16,600 DLH × $27 per DLH) $ 448,200

Machine hours

Fabricating department 14,900 MH

Implementation department 21,100 MH

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

                                 Fabricating     Implementation

Direct labor hours   140,000 DLH      315,000 DLH

Machine hours       152,000 MH          126,000 MH

Overhead cost   $ 360,000                 $ 450,000

Required 1. Determine the plantwide overhead rate for Laval using direct labor hours as a base.

Explanation / Answer

Plantwide overhead rate for Laval

Estimated overhead costs = $360000+$450000

= $810000

Estimated direct labor hours = 140000+315000

= 455000

Plantwide overhead rate for Laval using direct labor hours as a base

= 810000/455000

= $1.78

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