Question

Activity Handling materials Inspecting product Processing purchase orders Paying suppliers Insuring the factory Designing packaging Expected Costs $705,000 980,000 185,000 255,000 380,000 155,000 Expected Activity 100,000 parts 1,500 batches 700 orders 500 invoices 40,000 square feet 2 models Required: 1. Compute a single plantwide overhead rate for the year, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours. 2. In January of this year, the Deluxe model required 2,500 direct labor hours and the basic model required 6,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute a single plantwide overhead rate for the year, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours. Required 2 > < Prev 1 of 4 !!! Next >

Answer 1

1

Plantwide overhead rate = (Total Estimated overhead costs / Direct labor hours)
=> ($2660000 / 125000 hours)
=> $21.28

Direct labor hours = 125000 hours
Overhead = (Handling materials + Inspecting product + Processing purchase order + Paying supplies + Insuring factory + Designing packaging)
=> ($705000 + $980000 + $185000 + $255000 + $380000 + $155000)
=> $2660000

2

Overhead cost allocation

Model	Direct labor hours	Plantwide overhead rate	Overhead allocated
Deluxe	2500	$21.28	$53200 ($21.28 X 2500 hours)
Basic	6000	$21.28	$127680 ($21.28 X 6000 hours)

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