The total factory overhead for Home Lighting Inc. is budgeted for the year at $7

Question

The total factory overhead for Home Lighting Inc. is budgeted for the year at $760,000. Home Lighting Inc. manufactures two different products - night lights and desk lamps. Night lights is budgeted for 60,000 units. Each night light requires 1/2 hour of direct labor. Desk lamps is budgeted for 80,000 units. Each desk lamp requires 2 hours of direct labor. Determine (a) the total number of budgeted direct labor hours for year, (b) the single plantwide factory overhead rate using direct labor hours as the allocation base, and (c) the factory overhead allocated per unit for each product using the single plantwide factory overhead rate calculated in (b).

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Explanation / Answer

(a) the total number of budgeted direct labor hours for year,

Budgeted labour hour = (60000*.50+80000*2) = 190000 hours

(b) the single plantwide factory overhead rate using direct labor hours as the allocation base,

Overhead rate = 760000/190000 = 4 per labour hour

(c) the factory overhead allocated per unit for each product using the single plantwide factory overhead rate calculated in (b).

Night lights Desk lamps Labour hour 60000*.50=30000 80000*2=160000 Overhead rate per labour hour 4 4 Overhead applied 120000 640000 Units 60000 80000 Overhead cost per unit 2 8

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