Question

Exercise 17-6 Assigning overhead costs using the plantwide rate and departmental rate methods LO P1, P2 Laval 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 25,000 desk lamps produced annually follows. $265,000 Direct materials Direct labor Fabricating department (9,000 DLH * $28 per DLH) Assembly department (15,400 DLH * $23 per DLH) Machine hours Fabricating department Assembly department $252,000 $354,200 15,100 MH 20, 400 MH Expected overhead cost and related data for the two production departments follow. Direct labor hours Machine hours Overhead cost Fabricating 210,000 DLH 169,000 MH $350,000 Assembly 340,000 DLH 133,000 MH $435,000 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the plantwide overhead rate for Laval using direct labor hours as a base. < Required 1 Required 2 >

Answer 1

Solution 1:

Total direct labor hours for both departments = 210,000 + 340,000 = 550,000 DLH

Total overhead cost = $350,000 + $435,000 = $785,000

Plantwide overhead rate = Estimated overhead costs / estimated direct labor hours  = $785,000 / 550,000 = $1.43 per DLH

Solution 2

Direct materials	$265,000
Direct labor -Fabricating	$252,000
Direct labor - Assembly	$354,200
Overhead (1.43 x 24400)	$34892
Total manufacturing cost	$906,092
Units produced	25000
Manufacturing cost per unit	$36.24

Solution 3:

Computation of departmental overhead rate
Particulars	Fabricating	Assembly
Overhead cost of deparment	$350,000	$435,000
Allocation base	MH	DLH
Total machine hours	169,000
Total direct labor hours		340,000
Overhead rate of department	$2.07 MH	$1.28 DLH

Solution 4:

Direct materials		$265000
Direct labor
Fabricating	$252000
Assembly	$354200
		606,200
Overhead
Fabricating ($2.07* 15100)	31272
Assembly ($1.28* 15400)	19703
		50975
Total manufacturing cost		$922,175
Units produced		25000
Manufacturing cost per unit		$36.89