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M inbox (89). b ?New tab P American Col | 0 gMAV? Inforr M Inbox (89). b?Ch 17 Homev .com e https/newconnectmheducation.com/flow/connect html ework Exercise 17-6 Assigning overhead costs using the plantwide rate and departmental rate methods LO P1 P2 Laval produces lamps and home lighting fixtures. Its most popular product is a brushed aluminum desk lamp. Thits lamp is mede from components shaped in the fabricating department and assembled in the assembly department Information related to the 26,000 desk lamps produced annually follows Direct saterials Direct labor $268,000 Fabricating departnent (8,5e0 DLH $23 per DLH) $195,se0 Assembly department (16,000 DLH $26 per DLH) $416,00e Machine hours Fabricating department Assembly department 14,400 MH 28,550 MH Expected overhead cost and related data for the two production departments follow Direct labor hours Machine hours Overhead cost Fabricati lae ,000 DLH 161,800 MH 114,009 I 410,600 $428,00 Required 1. Detormine the plantwide overhead rate for Laval using direct labor hours as a base 2. Determine the sotal manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate 3. Compute departmental overhead rates based on machine hours in the fabricaing department and drect labor hours in the ossembly department 4. Use departmental overheed rales from requrement 3 to determine the total manifacturing cost per unit for the aluminum desk C Prev 4f Next Type here to search 'e???? ?Explanation / Answer
1. Determination of plantwide overhead rate for Laval using direct labour hour as a base:
Plant wide overhead rate = Total plant overhead / Total direct labour hours
= $ 830,000 / 510,000 D.L.H
= $1.63 per D.L.H
Total plant overhead = Overhead cost of fabrication department + Overhead cost of assembly department
= $ 410,000 + $ 420,000
= $ 830,000
Total direct labour hour = Total D.L.H of fabrication department + Total D.L.H of Assembly department
= 180,000 + 330,000
= 510,000
2. Determination of manufacturing cost per unit for aluminium desk lamp using plantwide overhead rate
Direct labour:
Total manufacturing cost per unit
Tota manufacturing cost / Total number of units of desk lamp
($ 911,435 / 26,000 units)
* Total overhead cost for aluminium desk lamp:
Total direct labour hour for aluminium desk lamp = Direct labour hour for fabrication + assembly department * plant wide overhead rate (as calculated in point no. 1)
= (8,500 D.L.H + 16,000 D.L.H) * 1.63
= 24500 * 1.63
= $ 39,935
3. Computation of Departmental overhead rate based on machine hours in fabrication department and based on direct labour hour in assembly department:
*Overhead rate based on M.H for fabrication department = Total overhead of fabrication department / Total machine hours of fabrication department
= 410,000 / 161,000
= $ 2.55
* Overhead rated based on D.L.H for assembly department = Total overhead of assembly department / Total labour hour for assembly department
= 420,000 / 330,000
= $ 1.27
4. Determination of total manufacturing cost per unit for the aluminium desk lamp using departmental rate as calculated in point no. 3
Direct material 260,000Direct labour:
Fabrication department 195,500 Assembly department 416,000 Overhead cost (attributable to desk lamp) * 39,935 Total Manufacturing cost 911,435 Total number of units manufactured of desk lamp 26000 unitsTotal manufacturing cost per unit
Tota manufacturing cost / Total number of units of desk lamp
($ 911,435 / 26,000 units)
35.06 per unitRelated Questions
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