Question

Overhead Calculations using different methods and inspecting price differences due to the different methods applied.

Answer 1

We first calculate the total estimated overhead and divide it by the total estimated labour hours to find a predetermined rate for overhead allocation by direct labour hours worked.

 

Applying that rate with DLH and considering other costs, we calculate the total and per unit manufacturing costs for the aluminum desk lamps.

 

Dividing the departmental overhead by the number of hours (machine or labour as the case may be) per department would give us an overhead rate for that department.

 

 

Expected Plantwide Total Overhead Cost = $ 420,000 + $ 415,000 = $ 835,000

Expected Plantwide Total Direct Labour Hours = 120,000 + 320,000 = 440,000 DLH

 

Plantwide Overhead Rate = Expected Plantwide Overhead / Expected Plantwide DLH

Plantwide Overhead Rate = $ 835,000 / 440,000 = $ 1.9 per DLH

 

Manufacturing Cost of Aluminum Desk Lamp
Direct Materials		$270,000
Direct Labour	$120,000
	$400,000	$520,000
Overhead	6000 x $1.9 = $ 11,400
	16000 x $ 1.9 = $ 30,400	$41,800
Total Manufacturing Cost (a)		$831,800
Number of units produced (b)		23000
Manufacturing Cost per Unit	a/b	$36.17

Question 3:

 

Fabricating Department = $ 420,000 / 157,000 MH = $ 2.68 per Machine Hour

Assembly Department = $ 415,000 / 320,000 MH = $ 1.3 per Labour Hour

 

Question 4:

Manufacturing Cost
Dirct Materials		$270,000
Direct Labour	$120,000
	$400,000	$520,000
Overheads:
Fabricating Department	14600 x $ 2.68	$39,128
Assembly Department	16000 x $ 1.3	$20,800
Total Manufacturing Cost	(a)	$849,928
Number of Units Produced	(b)	$23,000
Manufacturing Cost per unit	( a/b )	$36.95

Q1: Plantwide Overhead Rate: $1.9/hour

Q2: Unit Manufacturing Cost(plantwide overhead): $36.17

Q3: Fab Dept: $2.68/Machine hour           Assembly Dept: $1.3/Labor Hour

Q4: Unit Manufacturing Cost(departmental overhead): $36.95