Problem

Lavor produces lamps and home lighting fixtures. Its most popular product is a brushed alu...

Lavor 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 its implementation department. Information related to the 35,000 desk lamps produced annually follow.

Direct materials  

 $280,000

Direct labor

 

Fabricating department (7,000 DLH × $20 per DLH)  

$140,000

Implementation department (16,000 DLH × $29 per DLH)  

 $464,000

Machine hours

 

Fabricating department  

 15,040 MH

Implementation department  

21,000 MH

Expected overhead cost and related data for the two production departments follow.

 

Fabricating

Implementation

Direct labor hours

 75,000 DLH

125,000 DLH

Machine hours

80,000 MH

62,500 MH

Overhead cost

 $300,000

$200,000

Required

1. Determine the plantwide overhead rate for Lavor 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 implementation department.


4. Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps.

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Solutions For Problems in Chapter 17