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 31,000 desk lamps produced annually follows. $255,000 Direct materials Direct labor Fabricating department (9,000 DLH X $22 per DLH) Assembly department (16,000 DLH * $20 per DLH) Machine hours Fabricating department Assembly department $198,000 $320,000 14,800 MH 20,800 MH Expected overhead cost and related data for the two production departments follow. Direct labor hours Machine hours Overhead cost Fabricating 170,000 DLH 158,000 MH $390,000 Assembly 360,000 DLH 122,000 MH $410,000 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

1
Plantwide overhead rate	Estimated manufacturing overhead/Estimated direct labor hours
Plantwide overhead rate	(390000+410000)/(170000+360000)
Plantwide overhead rate	$1.51	per DLH
2
Calculation of manufacturing costs per unit is shown below
Direct materials	$255,000
Direct labor - Fabricating	$198,000
Direct labor - Assembly	$320,000
Total direct costs	$773,000
Manufacturing overhead applied	$37,750	(9000+16000)*1.51
Total manufacturing costs	$810,750
No of units produced	31000
Manufacturing costs per unit	$26.15
3
Departmental overhead rates - Fabrication	390000/158000
Departmental overhead rates - Fabrication	$2.47	per MH
Departmental overhead rates - Assembly	410000/360000
Departmental overhead rates - Assembly	$1.14	per DLH
4
Calculation of manufacturing costs per unit is shown below
Direct materials	$255,000
Direct labor - Fabricating	$198,000
Direct labor - Assembly	$320,000
Total direct costs	$773,000
Manufacturing overhead applied	$54,796	(14800*2.47; 16000*1.14)
Total manufacturing costs	$827,796
No of units produced	31000
Manufacturing costs per unit	$26.70