Question

ekly Homework Chapter 7 (14.190 dakyahate Saved Help Save & 16 Torello Corporation manufactures two products: Product H95V and Product V93N. The company uses a plantwide overhead rate based on direct labor hours. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products H95V and V93N. Activity Cost Pool Activity Measure Total Cost Total Activity Machining Machine-hours $242,000 11,000 MHS Machine setups Number of setups $140,000 350 setups Product design Number of products $ 70,000 2 products Order size Direct labor-hours $270,000 10,000 DLHS Book ferences Activity Measure Machine-hours Number of setups Number of products Direct labor-hours Product Product H95V V93N 6,000 5,000 250 100 1 1 6,000 4,000 What is the company's plantwide overhead rate?

Answer 1

Solution: Total overhead cost = Machining cost + set up cost + design costs + order costs Total overhead cost = $242.000+ $140.000+ $70.000 + $270.000 Total overhead cost = $722.000 Direct labor hours = 6,000+4.000 = 10,000 labor hours Plant wide overhead rate=Total overhead cost Direct labor hours = $722.000 / 10,000 hours = $72.20 per labor hour So Torello Corporation's plant wide overhead rate is $72.20 per labor hour