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.

Direct materials	$	255,000
Direct labor
Fabricating department (6,000 DLH × $23 per DLH)	$	138,000
Assembly department (15,400 DLH × $22 per DLH)	$	338,800
Machine hours
Fabricating department		14,700	MH
Assembly department		20,400	MH

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

	Fabricating			Assembly
Direct labor hours		190,000	DLH		315,000	DLH
Machine hours		163,000	MH		134,000	MH
Overhead cost	$	410,000		$	405,000

  
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

Plant-wide Overhead Rate	Estimated Overhead Cost / Estimated Direct Labor hrs = ($410,000 + $405,000) / (190,000 hrs + 315,000 hrs) = $815,000 / 505,000 hrs	$1.61 per Direct Labor Hour
Direct Materials		$255,000
Direct Labor – Fabricating		138,000
Direct Labor – Assembly		338,800
Overhead	$1.61 per DLH x (6,000 DLH + 15,400 DLH) = $1.61per DLH x 21,400 DLH	34,454
Total Manufacturing Costs		$766,254
Units produced		31,000 lamps
Manufacturing Cost per Unit		$24.72
Departmental Overhead Rate
Fabricating	Estimated Overhead Cost / Estimated Machine hrs = $410,000 / 163,000 MH	$2.52 per Machine Hr
Assembly	Estimated Overhead Cost / Estimated Direct Labor hrs = $405,000 / 315,000 MH	$1.29 per Direct Labor Hr
Direct Materials		$255,000
Direct Labor – Fabricating		138,000
Direct Labor – Assembly		338,800
Overhead - Fabricating	$2.52 per MH x 14,700 MH	37,044
Overhead – Assembly	$1.29 per DLH x 15,400 DLH	19,866
Total Manufacturing Costs		$788,710
Units produced		31,000 lamps
Manufacturing Cost per Unit		$25.44