Question

Exercise 17-10 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 26,000 desk lamps produced annually follows. $270,000 Direct materials Direct labor Fabricating department (6,500 DLH $29 per DLR) Assembly department (15,600 DL $28 per DLH) Machine hours Tabricating department Assembly department $189,500 $436,800 14,500 ML 20,900 MH Expected overhead cost and related data for the two production departments follow. Direct labor hours Machine hours Overhead cost Fabricating 190.000 DE 164.000 MH $420,000 Assembly 345,000 DLUI 130,000 MH $415,000

Answer 1

Solution 1:
Plantwide overhead rate
Total expected overhead of both departments	835000	1.56	per DLH
Total expected Direct labor Hours	535000
Solution 2:
Total manufacturing cost per unit
Direct materials	270000
Direct labor (188500+436800)	625300
Overhead applied [(6500+15600) DLH *$1.56)	34493
Total manufacturing cost	929793
Units produced	26000
Manufacturing Cost per unit	35.76
Solution 3:
Departmental overhead rate
Particulars	Fabricating	Assembly
Expected Overhead cost	$420,000	$415,000
/Budgeted Machine Hours	164000
/Budgeted direct labor Hours		345000
Departmental overhead rate	$2.56	$1.20
Solution 4:
Total manufacturing cost per unit
Direct materials		270000
Direct labor:
Fabricating Department	188500
Assembly Department	436800
		625300
Overhead applied:
Fabricating Department (14500 MH *$2.56)	37134
Assembly Department (15600 DLH *$1.20)	18765
		55899
Total manufacturing cost		951199
Units produced		26000
Manufacturing Cost per unit		36.58