Challenger Factory produces two similar products - regular widgets and deluxe wi

Question

Challenger Factory produces two similar products - regular widgets and deluxe widgets. The total plant overhead budget is $594,000 with 397,600 estimated direct labor hours. It is further estimated that deluxe widget production will need 2 direct labor hours for each unit and regular widget production will require 2 direct labor hours for each unit.

Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will Challenger Factory allocate to regular widget production if budgeted production for the period is 75,000 units and actual production for the period is 103,500 units?

Explanation / Answer

Predetermined Factory Overhead = Budgeted Overhead / Budgeted DIrect labor Hours

= $ 594,000 / 397,600 Direct Labor Hours

= $ 1.493963783 per Direct Labor Hour

Actual Hours = Total Actual Units * 2 Direct Labor Hours per unit

= 103,500 Units * 2 Direct Labor Hours per unit

= 207,000 Direct Labor Hours

Hence, Overhead Allocated = Predetermined Factory Overhead * Actual Hours

= $ 1.493963783 * 207,000 Direct Labor Hours

= $ 309,251

Hence the correct answer is c. $ 309,251

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