Question

HOW DO I CALCULATE?

Laval produces lamps and home lighting fixtures. Its most popular product is a brushed aluminum desk lamp. This lamp is made from components shaped in the fabricating department and assembled in the assembly department. Information related to the 28,000 desk lamps produced annually follows. $260,000 Direct materials Direct labor Fabricating department (6,500 DLH X $27 per DLH) Assembly department (15,400 DLH X $22 per DLH) Machine hours Fabricating department Assembly department $175,500 $338,800 14,500 MH 20,400 MH Expected overhead cost and related data for the two production departments follow. Direct labor hours Machine hours Overhead cost Fabricating Assembly 220,000 DLH 325,000 DLH 169,000 MH129,000 MH $380,000 $450,000 Required 1. Determine the plantwide overhead rate for Laval using direct labor hours as a base. 2. Determine the total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate. 3. Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department. 4. Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the plantwide overhead rate for Laval using direct labor hours as a base.

Answer 1

SOLUTION

1. Total direct labor hours for both departments = 220,000 + 325,000 = 545,000

Total overhead cost = $380,000 + $450,000 = $830,000

Plantwide overhead rate on the basis of direct labor hours = $830,000 / 545,000 = $1.52 per DLH

2. Computation of manufacturing cost per unit

Particulars	Amount ($)
Total Manufacturing cost:
Direct material	260,000
Direct Labor:
Fabricating department	175,500
Assembly department	338,800
Applied overhead [(6,500+15,400)*1.52]	33,288
Total manufacturing cost	807,588
Total desk lamp produced	28,000
Manufacturing cost per unit	28.84

3.

Particulars	Fabricating	Assembly
Overhead cost of department	380,000	450,000
Allocation base
Total machine hours	169,000
Total direct labor hours		325,000
Overhead rate of department	2.25	1.38

4.

Total Manufacturing cost:
Direct material	260,000
Direct Labor:
Fabricating department	175,500
Assembly department	338,800
Applied overhead:
Fabricating department (14,500*2.25)	32,625
Assembly department (15,400*1.38)	21,252
Total manufacturing cost	828,177
Total desk lamp produced	28,000
Manufacturing cost per unit	29.58