Question

Western Company allocates $10 overhead to products based on the number of machine hours used. The company uses a plantwide overhead rate with machine hours as the allocation base. Given the amounts below, how many machine hours does the company expect in department 2?

Estimated:	Department 1					Department 2
Manufacturing overhead costs	$	263,000				$	163,000
Direct labor hours		9,300	DLH				25,000	DLH
Machine hours		16,300	MH				?	MH

Multiple Choice

• 35,600 MH

• 146,730 MH

• 87,830 MH

• 94,500 MH

• 26,300 MH

Bond Company uses a plantwide overhead rate with direct labor hours as the allocation base. Use the following information to solve for the amount of direct labor hours estimated per unit of product G2.

Direct material cost per unit of G2	$	6
Total estimated manufacturing overhead	$	318,000
Total cost per unit of G2	$	31
Total estimated direct labor hours		159,000	DLH
Direct labor cost per unit of G2	$	5.15

Multiple Choice

• 2.00 DLH per unit of G2.

• 9.93 DLH per unit of G2.

• 18.00 DLH per unit of G2.

• 0.79 DLH per unit of G2.

• 11.15 DLH per unit of G2.

Answer 1

1)Correct option is "E"- 26300

Total Estimated overhead in both departments = 263000 + 163000 =426000

Plantwide overhead rate =Total estimated overhead /Total estimated machine hours in both department

   10 = 426000 / Total estimated machine hours in both department

Total estimated machine hours in both department= 426000/10

                       = 42600 MH

Total estimated machine hours in both department = MH in Department 1 +MH in Department 2

42600 = 16300+ MH in Department 2

MH in Department 2 = 42600-16300

                = 26300 MH

2)Correct option is "B"- 9.93 DLH per unit of G2.

Plant wide overhead rate =Estimated overhead /estimated direct labor hours

              = 318000 /159000

              = $ 2 per DLH

Let the hours required per unit is "X"

Total cost per unit =Direct material cost +Direct labor+ overhead applied

31 = 6 + 5.15 + (X*2)

31 = 11.15 +2X

31 -11.15 = 2X

19.85 /2 =X

X = 9.925 DLH

Direct labor hours required per unit = 9.925DLH (ROUNDED TO 9.93 )