The Kaumajet Factory produces two products - table lamps and desk lamps. It has

Question

The Kaumajet Factory produces two products - table lamps and desk lamps. It has two separate departments - finishing and production. The overhead budget for the finishing department is $550,000, using 500,000 direct labor hours. The overhead budget for the production department is $400,000 using 80,000 direct labor hours. If the budget estimates that a desk lamp will require 1 hours of finishing and 2 hours of production, what is the total amount of factory overhead to be allocated to desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours, if 26,000 units are produced? A. $540,000 B. $187,200 C. $475,000 D. $288,600

Explanation / Answer

Predetermined rate for allocating overhead of Finishing department = $550000 / 500000 hours = $1.10 / hour

Predetermined rate for allocating overhead of Production department = $400000 / 80000 hours = $5 / hour

Budgeted Overhead cost to be allocated to one lamp = 1 hour x $1.10/hour + 2 hours x $5/hour = $11.10

For 26000 lamps, the total factor overhead to be allocated = 26000 x $11.10 = $288600

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