Challenger Factory produces two similar products - small lamps and desk lamps. T

Question

Challenger 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 use 3 direct labor hours for each unit and desk lamp production will require 1.25 direct labor hours for each unit. Using the single plant-wide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will be allocated to the desk lamp production if the actual production for the period is 121,000 units?

Explanation / Answer

Overhead rate per hour = 640000 / 400000 = $ 1.60 per DLH

Now overhead cost allocated to desk lamp = 121000 * 1.25 = 151250 hours * 1.60

                                                                                                           = $ 242000

correct option is "A"

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