Question

Single plantwide factory overhead rate

Bach Instruments Inc. makes three musical instruments: flutes, clarinets, and oboes. The budgeted factory overhead cost is $99,120. Overhead is allocated to the three products on the basis of direct labor hours. The products have the following budgeted production volume and direct labor hours per unit:

	Budgeted Production Volume		Direct Labor Hours Per Unit
Flutes	2,200	units	0.4
Clarinets	700		1.4
Oboes	1,400		1.2

If required, round all per unit answers to the nearest cent.

a. Determine the single plantwide overhead rate.
$ per direct labor hour

b. Use the overhead rate in (a) to determine the amount of total and per-unit overhead allocated to each of the three products.

	Total Factory Overhead Cost	Per Unit Factory Overhead Cost
Flutes	$	$
Clarinets
Oboes
Total	$

Answer 1

a. Determine the single plantwide overhead rate.
Total Direct Labor Hours
Flutes	=2200 units *0.4 hour per unit	880
Clarinets	=700 units *1.4 hours per unit	980
Oboes	=1400 units *1.2 hour per unit	1680
	Total Hours	3540
Plantwide overhead rate = Total Overhead Cost / Total labor hours
	=$99,120/3540
	=$28 per hour
b. Use the overhead rate in (a) to determine the amount of total and per-unit overhead allocated to each of the three products.
Product	Total Labor Hours	Total Overhead	Total Units	Overhead Per Unit
a	b	c=b*$28	d	e=c/d
Flutes	880	$               24,640	2200	$                        11.20
Clarinets	980	$               27,440	700	$                        39.20
Oboes	1680	$               47,040	1400	$                        33.60
Total	3540	99120	4300
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