Question

Challenger Factory produces two similar products: regular widgets and deluxe widgets. The total factory overhead budget is $565,000 with 362,700 estimated direct labor hours. Deluxe widget production requires 3 direct labor hours for each unit, and regular widget production requires 6 direct labor hours for each unit. Using a single plantwide factory overhead rate with an allocation base of direct labor hours, the factory overhead that Challenger Factory will allocate to regular widget production if budgeted production of regular widgets for the period is 75,000 units and actual production of regular widgets for the period is 119,900 units would be a. $94,167 Ob. $560,327 c. $1,122,264 d. $186,776

Answer 1

Solution :

Calculation of Single plantwide factory overhead rate :

As per the information given in the question a single plant wide factory overhead rate based on direct labor hours is used for calculation of factory overhead.

Thus the single plantwide factory overhead rate = Total factory overhead budget / Estimated direct labor Hours

We know that

Total factory overhead budget = $ 565,000 ; Estimated direct labor Hours = 362,700

Applying the above information in the formula we have

= $ 565,000 / 362,700

= $ 1.5578

= $ 1.56 ( when rounded off to two decimal places )

Thus the single plantwide factory overhead rate based on direct labor hours is = $ 1.56

Calculation of factory overhead to regular widget production:

The Allocation of factory overhead to regular widget production is

= Actual Direct labor Hours for regular widget production * Single plantwide factory overhead rate

= ( Actual units of regular widget productions * Direct labor hours required to produce a single regular widget ) * Single plantwide factory overhead rate

As per the information available in the question we have

Actual units of regular widget production = 119,900 ;

Direct labor hours required to produce a single regular widget = 6 hours ;

Single plantwide factory overhead rate = $ 1.56

Applying the above information we have allocated factory overhead based on single plantwide overhead rate

= 119,900 * 6 * $ 1.56

= $ 1,122,264

Thus the allocated factory overhead = $ 1,122,264

The solution is Option c. $ 1,122,264

Answer 2

Calculation of Single plantwide factory overhead rate :

As per the information given in the question a single plant wide factory overhead rate based on direct labor hours is used for calculation of factory overhead.

Thus the single plantwide factory overhead rate = Total factory overhead budget / Estimated direct labor Hours

We know that

Total factory overhead budget = $ 565,000 ; Estimated direct labor Hours = 362,700

Applying the above information in the formula we have

= $ 565,000 / 362,700

= $ 1.5578

= $ 1.56 ( when rounded off to two decimal places )

Thus the single plantwide factory overhead rate based on direct labor hours is = $ 1.56

Calculation of factory overhead to regular widget production:

The Allocation of factory overhead to regular widget production is

= Actual Direct labor Hours for regular widget production * Single plantwide factory overhead rate

= ( Actual units of regular widget productions * Direct labor hours required to produce a single regular widget ) * Single plantwide factory overhead rate

As per the information available in the question we have

Actual units of regular widget production = 119,900 ;

Direct labor hours required to produce a single regular widget = 6 hours ;

Single plantwide factory overhead rate = $ 1.56

Applying the above information we have allocated factory overhead based on single plantwide overhead rate

= 119,900 * 6 * $ 1.56

= $ 1,122,264

Thus the allocated factory overhead = $ 1,122,264

The solution is Option c. $ 1,122,264