Question

Xie Company identified the following activities, costs, and activity drivers for this year. The company manufactures two types of go- karts: Deluxe and Basic Activity Handling materials Inspecting product Processing purchase orders Paying suppliers Insuring the factory Designing packaging Expected Costs $ 670,000 945,000 150,000 220,000 345,000 120,000 Expected Activity 100,000 parts 1,500 batches 700 orders 500 invoices 40,000 square feet 2 models Required: 1. Compute a single plantwide overhead rate for the year, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours. 2. In January of this year, the Deluxe model required 2,500 direct labor hours and the basic model required 6,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute a single plantwide overhead rate for the year, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours.

Answer 1

1.

Estimated overhead costs = Handling materials + Inspecting product + Processing purchase orders + Paying suppliers + Insuring the factory + Designing packaging

= 670,000+945,000+150,000+220,000+345,000+120,000

= $2,450,000

Estimated direct labor hours = 125,000

Predetermined overhead rate = Estimated overhead costs / Estimated direct labor hours

= 2,450,000/125,000

= $19.6 per direct labor hour

2.

	Total DL Hours required	Plantwide OH Rate	Total Overhead Cost
Deluxe model	2,500	19.6	49,000
Basic model	6,000	19.6	117,600

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