Question

Saved Smythe Co. makes furniture. The following data are taken from its production plans for the year. $5,310,000 620,000 Direct labor costs Hazardous waste disposal costs Chairs Tables Expected production Direct labor hours required Hazardous waste disposed 218,000 units 272,000 DLH 600 pounds 19,000 units 15,400 DLH 800 pounds Required: 1. Determine the hazardous waste disposal cost per unit for chairs and for tables if costs are assigned using a single plantwide overhead rate based on direct labor hours. OH Cost per unit OH $ per direct labor hour Activity Driver Units Produced Product Total Overhead Cost Chairs Tables 2. Determine hazardous waste disposal costs per unit for chairs and for tables if costs are assigned based on the number of pounds disposed of. OH Cost per unit Activity Driver Units Produced OH $ per pound Product Total Overhead Cost Chairs Tables 3. Which method is better for assigning costs to each product? Assignment based on direct labor hours Assignment based on the number of pounds

Answer 1

Answer

Hazardous Waste Disposal Costs	$620,000	$                           2.16	per direct labor hours
No. of DLHs	287,400
Product:	Activity Driver	OH $ per DLH	Total Overhead Costs	Units Produced	OH Cost per unit
Chairs	272,000	2.16	$587,520	218,000	$                             2.70
Tables	15,400	2.16	$33,264	19,000	$                             1.75
Hazardous Waste Disposal Costs	$620,000	$                      442.86	per pound disposed off
No. of pound disposed of	1,400
Product:	Activity Driver	OH $ per DLH	Total Overhead Costs	Units Produced	OH Cost per unit
Chairs	600	$                      442.86	$265,716	218,000	$                             1.22
Tables	800	$                      442.86	$354,288	19,000	$                           18.65

--Requirement 3

>Assignment based on Direct Labor hours as there is not much difference between overhead cost per unit for tables and chairs.