K Company estimates that overhead costs for the next year will be $3,800,000 for
ID: 2528318 • Letter: K
Question
K Company estimates that overhead costs for the next year will be $3,800,000 for indirect labor and $970,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 106,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate? $0.02 per direct labor hour. $0.11 per direct labor hour. $45.00 per direct labor hour. $9.15 per direct labor hour. $35.85 per direct labor hour
. Kamper Company sells two products Big Z and Little Z. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $484,000. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $20 per hour and the company expects to manufacture 41,000 units of Big Z and 18,000 units of Little Z next year. Direct Material per Unit Direct Labor Dollars per Unit Big Z $15 $16 Little Z $21 $11 What are total estimated direct labor hours for this next year? 1,593,000 total DLH. 342,857 total DLH. 854,000 total DLH. 42,700 total DLH. 1,196,857 total DLH.
Explanation / Answer
a) Total overhead = 3800000+970000 = 4770000
Labour hour = 106000
Overhead rate = 4770000/106000 = 45 per labour hour
so answer is c) $45.00 per direct labour hour
b) labour hour per unit big Z = 16/20 = 0.80
Labour hour per unit Little Z = 11/20 = 0.55
Total labour hour = (41000*.8+18000*.55) = 42700
so answer is d) total DLH 42700
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