mythe Co. makes furniture. The following data are taken from its
production plans for the year.
Direct labor costs | $ | 5,450,000 | |
Hazardous waste disposal costs | 620,000 | ||
Chairs | Tables | |||
Expected production | 210,000 | units | 11,000 | units |
Direct labor hours required | 260,000 | DLH | 15,400 | DLH |
Hazardous waste disposed | 600 | pounds | 1,000 | pounds |
1. determine the hazardous waste disposal cost per unit for chairs and for tables if costs are assigned using a single plantwide overhead rate based on direct hours.
2.determine hazardous waste disposal costs per unit for chairs and tables if the costs are assigned based on the number of pounds disposed of
Ans. 1 | Overhead rate = Hazardous waste disposal cost / Direct labor hours | |||||
$620,000 / 275,400 | ||||||
$2.25 | per direct labor hour | |||||
Product | Activity Driver (a) | OH $ per direct labor hour (b) | Total overhead cost (a*b) | Expected production | OH cost per unit | |
Chairs | 260000 | $2.25 | $585,000 | 210000 | $2.79 | |
Tables | 15400 | $2.25 | $34,650 | 11000 | $3.15 | |
Overhead cost per unit = Total overhead cost / Units produced | ||||||
*Working Notes: | ||||||
*Calculations for Total direct labor hours : | ||||||
Product | Direct Labor Hours | |||||
Chairs | 260000 | |||||
Tables | 15400 | |||||
Total direct labor hours | 275400 | |||||
Ans. 2 | Overhead rate = Hazardous waste disposal cost / Number of pounds disposed | |||||
$620,000 / 1,600 | ||||||
$387.50 | per pound | |||||
Product | Activity Driver (a) | OH $ per pound (b) | Total overhead cost (a*b) | Units produced | OH cost per unit | |
Chairs | 600 | $387.50 | $232,500 | 210000 | $1.11 | |
Tables | 1000 | $387.50 | $387,500 | 11000 | $35.23 | |
Overhead cost per unit = Total overhead cost / Units produced | ||||||
*Working Notes: | ||||||
*Calculations for Number of pounds disposed of : | ||||||
Product | Number of pounds | |||||
Chairs | 600 | |||||
Tables | 1000 | |||||
Total number of pounds | 1600 | |||||
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