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 27,000 desk lamps produced annually follows. Direct materials $ 270,000 Direct labor Fabricating department (9,500 DLH × $32 per DLH) $ 304,000 Assembly department (16,200 DLH × $25 per DLH) $ 405,000 Machine hours Fabricating department 14,400 MH Assembly department 20,350 MH Expected overhead cost and related data for the two production departments follow. Fabricating Assembly Direct labor hours 210,000 DLH 320,000 DLH Machine hours 162,000 MH 134,000 MH Overhead cost $ 350,000 $ 450,000 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

1. Determine the plantwide overhead rate for Laval using direct labor hours as a base.

Plantwide overhead costs= Total overhead costs/Total direct labor hours

= ($350000+450000)/(210000+320000)

= $800000/530000

= $1.51 per DLH

2. Determine the total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate.

Direct materials		$270000
Direct labor:
Fabricating department	304000
Assembly department	405000	709000
Overhead (9500+16200)*$1.51		38807
Total manufacturing costs		$1017807
Number of lamp desks produced		27000
Total manufacturing cost per unit		$37.70

3. Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department.

Fabricating department= Overhead costs/Machine hours

= $350000/162000= $2.16 per MH

Assembly department= Overhead costs/Labor hours

= $450000/320000= $1.41 per DLH

4. Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps.

Direct materials		$270000
Direct labor:
Fabricating department	304000
Assembly department	405000	709000
Overhead:
Fabricating department (14400*$2.16)	31104
Assembly department (16200*$1.41)	22842	53946
Total manufacturing costs		$1032946
Number of lamp desks produced		27000
Total manufacturing cost per unit		$38.26