Question

The Kaumajet Factory produces two products - table lamps and desk lamps. It has two separate departments - Finishing and Production. The overhead budget for the Finishing Department is $492,298, using 375,800 direct labor hours. The overhead budget for the Production Department is $406,351 using 69,700 direct labor hours. If the budget estimates that a desk lamp will require 5 hours of finishing and 8 hours of production, what is the total amount of factory overhead the Kaumajet Factory will allocate to desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours, if 10,700 units are produced?

Answer 1

Therefore, factory overhead rate for Finishing Department is equal to $1.31 per labor hour.

  

Therefore, factory overhead rate for Production Department is equal to $5.83 per labor hour.

Computation of Total Amount of Factory Overhead (10,700 units)
Particulars	Labor Hours for 1 unit	Total Labor Hours required for 10,700 units	Overhead rate per Labor hour ($)	Total Amount of Factory Overhead allocated ($)
Finishing Department	5	53,500 hours	$1.31	70,085
Production Department	8	85,600 hours	$5.83	499,048
Total				$569,133

Therefore, total amount of overhead allocated to the production of 10,700 units is equal to $569,133.