Question

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 (7,500 DLH * $32 per DLH) Assembly department (15,600 DLH * $29 per DLH) Machine hours Fabricating department Assembly department $ 240,000 $452,400 14, 200 MH 20,750 MH Expected overhead cost and related data for the two production departments follow. Direct labor hours Machine hours Overhead cost Fabricating 130,000 DLH 166,000 MH $350,000 Assembly 345,000 DLH 134,000 MH $450,000 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.

Answer 1

Answer to Requirement 1.
Estimated Overhead Costs = $350,000 + $450,000
Estimated Overhead Costs = $800,000

Estimated allocation base = 130,000 DLH + 3450,000 DLH
Estimated allocation base = 475,000 DLH

Plantwide Overhead rate = Estimated Overhead Costs / Estimated allocation base
Plantwide Overhead rate = $800,000 / 475,000
Plantwide Overhead rate = $1.68 per DLH

Answer to Requirement 2.

Direct Materials Direct Labor - Fabricating Direct Labor - Assembly Overhead Total Manufacturing Costs Units Produced Manufacturing Cost per unit 265,000 240,000 452,400 38,808 996,208 25,000 39.85 Direct Labor Hours applied = 7,500 + 15,600 = 23,100 DLH Overhead Costs = 23,100 * $1.68 = $38,808

Answer to Requirement 3.
Departmental Overhead rate = Estimated Overhead Cost / Estimated Allocation base

Fabricating Departmental Overhead Rate = $350,000 / 166,000
Fabricating Departmental Overhead Rate = $2.11 per MH

Assembly Departmental Overhead Rate = $450,000 / 345,000
Assembly Departmental Overhead Rate = $1.30 per DLH

Answer to Requirement 4.

265000 240,000 452,000 692,000 Direct Materials Direct Labor: Fabricating Assembly Total Direct Labor Overhead Fabricating ($2.11 * 14,200) Assembly ($1.30 * 15,600) Total Overhead Total Manufacturing Costs Units produced Manufacturing Cost per unit 29,962 20,280 50,242 1,007,242 22000 45.78