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 its assembly department. Information related to the 31,000 desk lamps produced annually follow.

  

Direct materials		$	265,000
Direct labor
Fabricating department (7,000 DLH × $25 per DLH)		$	175,000
Assembly department (16,200 DLH × $22 per DLH)		$	356,400
Machine hours
Fabricating department			14,400	MH
Assembly department			20,100	MH

  

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

  

	Fabricating					Assembly
Direct labor hours			130,000	DLH				360,000	DLH
Machine hours			174,000	MH				126,000	MH
Overhead cost		$	390,000				$	455,000

  

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. (Round the intermediate calculations to 2 decimal places for overhead costs.)

     

3.	Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department.(Round your answers to 2 decimal places.)

    

4.	Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps. (Round the intermediate calculations to 2 decimal places for overhead costs.)

     

Answer 1

Answer to Requirement 1.

Plantwide Overhead Rate = Estimated Manufacturing Overhead / Estimated Allocation base
Estimated Manufacturing Overhead = $390,000 + $455,000
Estimated Manufacturing Overhead = $845,000

Estimated Direct Labor Hours = 130,000 + 360,000
Estimated Direct Labor Hours = 490,000 DLH

Plantwide Overhead Rate = $845,000 / 490,000
Plantwide Overhead Rate = $1.72 per DLH

Answer to Requirement 2.

Total Manufacturing Cost = Direct Materials + Direct Labor + Manufacturing Overhead

Manufacturing Overhead allocated to Fabricating Department = $1.72 * 7,000
Manufacturing Overhead allocated to Fabricating Department = $12,040

Manufacturing Overhead allocated to Assembly Department = $1.72 * 16,200
Manufacturing Overhead allocated to Assembly Department = $27,864

Total Manufacturing Overhead = $12,040 + $27,864
Total Manufacturing Overhead = $39,904

Direct Labor = $175,000 + $356,400 = $531,400

Total Manufacturing Cost = $265,000 + $531,400 + $39,904
Total Manufacturing Cost = $836,304

Total Manufacturing Cost per Unit = $836,304 / 31,000
Total Manufacturing Cost per Unit = $26.98

Answer to Requirement 3.

Overhead Rate = Estimated Manufacturing Overhead / Estimated Allocation base

Fabricating Department Overhead Rate = $390,000 / 174,000
Fabricating Department Overhead Rate = $2.24

Assembly Department Overhead Rate = $455,000 / 360,000
Assembly Department Overhead Rate = $1.26

Answer to Requirement 4.

Overhead Allocated to Fabricating Department = 14,400 * $2.24
Overhead Allocated to Fabricating Department = $32,256

Overhead Allocated to Assembly Department = 16,200 * $1.26
Overhead Allocated to Assembly Department = $20,412

Total Overhead Allocated = $32,256 + $20,412
Total Overhead Allocated = $52,668

Direct Labor = $175,000 + $356,400 = $531,400

Total Manufacturing Cost = $265,000 + $531,400 + $52,668
Total Manufacturing Cost = $849,068

Total Manufacturing Cost per Unit = $849,068 / 31,000
Total Manufacturing Cost per Unit = $27.39