Question

Dawson Company manufactures small table lamps and desk lamps. The following shows the activities per product and the total overhead information:

	Units	Setups	Inspections	Assembly (dlh)
Small table lamps	3,400	3,300	9,750	41,200
Desk lamps	7,700	6,600	16,250	41,200

Activity	Total Activity-Base Usage	Budgeted Activity Cost
Setups	9,900	$93,060
Inspections	26,000	148,200
Assembly (dlh)	72,100	331,660

The total factory overhead to be allocated to each unit of small table lamps is

a.$138.06

b.$113.69

c.$81.21

d.$56.85

Answer 1

Working Notes: 1
	Calculation of the Cost Driver Rate
	Cost Driver Rate = Activity Cost / Cost Driver
			Activity Cost / Cost Driver =
	Activity	Cost Driver	Activity Cost	"/"	Cost Driver	" = " To	Cost Driver Rate
	Set-ups	No. of Set-ups	$                         93,060	"/"	9,900	" = " To	$                      9.40
	Inspection	No. of Inspection	$                     1,48,200	"/"	26,000	" = " To	$                      5.70
	Assembly	Direct Labor Hours	$                     3,31,660	"/"	72,100	" = " To	$                      4.60
		Total	$                     5,72,920
Solution :
	Calculation of the Cost allocation for Activity for Small Table
	Activity	Activity Used	"X " By	Cost Driver rate	Cost
	No. of Set-ups	3,300	"X " By	$                  9.40	$                   31,020
	No. of Inspection	9,750	"X " By	$                  5.70	$                   55,575
	Direct Labor Hours	41,200	"X " By	$                  4.60	$               1,89,520
		Total Cost			$               2,76,115
		Divide By			"/" By
		No. of Units Prodcued		3400
		Factory overhead per unit		$                     81.21
Answer = Option C = $ 81.21