Question

Unit Single plantwide factory overhead rate Bach Instruments Inc. makes three musical instruments: flutes, clarinets, and oboes. The budgeted factory overhead cost is $101,040. Overhead is allocated to the three products on the basis of direct labor hours. The products have the following budgeted production volume and direct labor hours per unit: Budgeted Production Direct Labor Hours Per Volume 2,700 units 0.8 500 1,300 If required, round all per unit answers to the nearest cent. a. Determine the single plantwide overhead rate. per direct labor hour b. Use the overhead rate in (a) to determine the amount of total and per-unit overhead allocated to each of the three products. Total Per Unit Factory Overhead Cost Factory Overhead Cost Flutes Clarinets Oboes 1.5 1.0 Flutes Clarinets Oboes Total

Answer 1

Solution to requirement (a) :

Computation of plantwide overhead rate :

Total overhead                = $ 1,01,040

Computation of labor hours :

Particulars	Production volume	Direct labor per unit	Number of labor hours required
Flutes	2,700 units	0.8 hours	2,160 hours (2,700 units* 0.80 hrs)
Clarinets	500 units	1.5 hours	750 hours (500 units*1.5 hrs)
Oboes	1,300 units	1.0	1,300 hours (1,300 units*1 hr)
Total			4,210 hours

  

Direct labor hours                          = 4,210 hours

Plantwide overhead rate = Total overhead / Direct labor hours

Plantwide overhead rate = $ 1,01,040 / 4,210 hours

Plantwide overhead rate = $ 24.00 per hour

Solution to Requirement (b):

Particulars	Total factory overhead cost (A)	Number of units (B)	Per unit factory overhead cost C = A / B
Flutes	$ 51,840 (2,160 hours*$ 24)	2,700 units	$ 19.20 ($ 51,840 / 2,700 units)
Clarinets	$ 18,000 (750 hours*$ 24)	500 units	$ 36.00 ( $18,000 / 500 units)
Oboes	$ 31,200 (1,300 hours *$ 24)	1,300 units	$ 24.00 ($ 31,200 / 1,300 units )
Total	$ 1,01,040

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