Question

Randy Company produces candy sticks (hooked and straight). Both products pass through two producing departments. The hooked stick's production is much more labor-intensive than the straight stick. The straight stick is also more popular. The following data have been gathered for the two products:

Product Data

Hooked Straight

Units produced per year 200,000 2,000,000

Direct labor hours 10,000 40,000

Machine hours 10,000 70,000

Total overhead costs equal $400,000. Randy applies overhead based on direct labor hours. Required: If required, round your answers to the nearest cent.

A. Calculate the plantwide overhead rate based on direct labor hours. $fill in the blank 1 per direct labor hour

B. Using the plantwide overhead rate, calculate the overhead cost per unit for hooked sticks. $fill in the blank 2 per unit

C. Using the plantwide overhead rate, calculate the overhead cost per unit for straight sticks. $fill in the blank 3 per unit

D. Recalculate the plantwide overhead rate assuming Randy Company applies overhead based on machine hours. $fill in the blank 4 per machine hour

E. Assuming that the per-unit prime cost for hooked sticks is $0.47, what is the per-unit cost using the overhead rate developed in part A? $fill in the blank 5

F. Assuming that the per-unit prime cost for hooked sticks is $0.47, what is the per-unit cost using the overhead rate developed in part D? $fill in the blank 6

Answer 1

A)Total direct labour hours= 10,000 + 40,000 hours = 50,000 hours

Plantwide overhead rate based on direct labour hours= Total overhead cost/ Total direct labour hours

=$400,000/50,000

=$ 8 per direct labour hour

B)Total overhead cost of hooked sticks based on direct labour hours

= Plantwide overhead rate x Direct labour hours used in hooked sticks

=$8 x 10,000

=$80,000

Overhead cost per unit for hooked sticks= Total overhead cost for hooked sticks/No of hooked sticks produced

=$80,000/200,000

=$0.40 per unit

C)Total overhead cost of Straight sticks based on direct labour hours

= Plantwide overhead rate x Direct labour hours used in Straight sticks

=$8 x 40,000

=$320,000

Overhead cost per unit for Straight sticks= Total overhead cost for hooked sticks/No of Straight sticks produced

=$320,000/2,000,000

=$0.16 per unit

D)Total Machine Hours= 10,000 + 70,000 =80,000 hours

Plantwide overhead rate based on machine hours= Total overhead cost/ Total machine hours

=$400,000/80,000

=$ 5 per machine hour

E)Per-unit cost of hooked sticks using the overhead rate developed in part A

= Prime cost per unit of hooked sticks + overhead cost per unit of hooked sticks based on based on direct labour hours

=$0.47+0.40

=$0.87 per unit

F)Total overhead cost of hooked sticks based on machine hours

= Plantwide overhead rate based on machine hours x Machine hours used in hooked sticks

=$5 x 10,000

=$50,000

Overhead cost per unit of hooked sticks based on machine hours

=Total overhead cost of hooked sticks based on machine hours/No of hooked sticks produced

=$50,000/200,000

=$0.25 per unit

Per unit cost of hooked sticks using the overhead rate developed in part D

=Prime cost per unit of hooked sticks + overhead cost per unit based on based on machine hours

=$0.47+0.25

=$0.72 per unit