Question

In: Accounting

Laval produces lamps and home lighting fixtures. Its most popular product is a brushed aluminum desk...

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.

Solutions

Expert Solution

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


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