cLaval 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 35,000 desk lamps produced annually follows. Direct materials $ 255,000 Direct labor Fabricating department (9,000 DLH × $33 per DLH) $ 297,000 Assembly department (16,000 DLH × $22 per DLH) $ 352,000 Machine hours Fabricating department 14,800 MH Assembly department 20,100 MH Expected overhead cost and related data for the two production departments follow. Fabricating Assembly Direct labor hours 200,000 DLH 350,000 DLH Machine hours 157,000 MH 135,000 MH Overhead cost $ 410,000 $ 420,000 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.
Requirement #1:
Total direct labor hours for both departments:
= 200,000 + 350,000
= 550000 DLH
Total overhead cost = $ 410,000 + $ 420,000
= $830,000
Plantwide overhead rate on the basis of direct labor hours :
= $830000 / 550000
= $1.509 per DLH
Requirement#2:
Computation of manufacturing cost per unit - Plantwide overhead rate | |
Particulars | Amount |
Total Manufacturing cost: | |
Direct material | $255,000 |
Direct Labor: | |
Fabricating department | $ 297,000 |
Assembly department | $ 352,000 |
Applied overhead (25000* x $1.509) | $37,725 |
*25000=9000+16000 | |
Total manufacturing cost | $941,725 |
Total desk lamp produced | 35,000 |
Manufacturing cost per unit(941725/35000) | $26.906 |
Requirement#3:
Computation of departmental overhead rate | ||
Particulars | Fabricating | Assembly |
Overhead cost of deparment | $410000.00 | $420000.00 |
Allocation base | MH | DLH |
Total machine hours | 157000 | |
Total direct labor hours | 350000 | |
Overhead rate of department |
$2.611 |
$1.2 |
Requirement#4:
Computation of manufacturing cost per unit - Departmental overhead rate | |
Particulars | Amount |
Total Manufacturing cost: | |
Direct material | $255000 |
Direct Labor: | |
Fabricating department | $297000 |
Assembly department | $352000 |
Applied overhead: | |
Fabricating department (14800*$2.611) | $38,642.8 |
Assembly department (16000*$1.20) | $19,200 |
Total manufacturing cost | $961,842.8 |
Total desk lamp produced | 35,000 |
Manufacturing cost per unit | $27.48 |
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