The total factory overhead for Big Light Company is budgeted for the year at $40

Question

The total factory overhead for Big Light Company is budgeted for the year at $403,750. Big Light manufactures two different products - night lights and desk lamps. Night lights is budgeted for 30,000 units. Each night light requires 1/2 hour of direct labor. Desk lamps is budgeted for 40,000 units. Each desk lamp requires 2 hours of direct labor.

a. Determine the total number of budgeted direct labor hours for the year.

b. Determine the single plantwide factory overhead rate using direct labor hours as the allocation base. Round your answers to two decimal places, if necessary.

c. Determine the factory overhead allocated per unit for each product using the single plantwide factory overhead rate calculated in (b). Round your answers to two decimal places, if necessary.

Explanation / Answer

Answer:

(a) Total number of budgeted direct labor hours for the year = Direct labor hours for night lights + Direct labor hours for desk lamps

= 30,000 * 1/2 + 40,000 * 2 = 95,000 hours

(b) Single plant-wide factory overhead rate using direct labor hours = Budgeted factory overhead / budgeted factory hours

= $403,750 / 95,000 hours = $4.25 per hour

(c) Per unit factory overhead = No. of hours required to complete one unit * factory overhead rate per hour

Night light = .5 * 4.25 = $2.125 per unit

Desk lamp = 2 * 4.25 = $8.50 per unit

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