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 35,000 desk lamps produced annually follows.

Direct materials	$	260,000
Direct labor
Fabricating department (6,500 DLH × $34 per DLH)	$	221,000
Assembly department (16,200 DLH × $22 per DLH)	$	356,400
Machine hours
Fabricating department		14,100	MH
Assembly department		20,500	MH

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

	Fabricating			Assembly
Direct labor hours		120,000	DLH		345,000	DLH
Machine hours		170,000	MH		130,000	MH
Overhead cost	$	420,000		$	420,000

  
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

Answer to Requirement 1.
Estimated Overhead Costs = $420,000 + $420,000
Estimated Overhead Costs = $840,000

Estimated Direct Labor Hours = 120,000 + 345,000
Estimated Direct Labor Hours = 465,000 DLH

Plantwide Overhead Rate = Estimated Overhead Costs / Estimated Direct Labor Hours
Plantwide Overhead Rate = $840,000 / 465,000
Plantwide Overhead Rate = $1.81 per DLH

Answer to Requirement 2.

Answer to Requirement 3.

Fabricating Department Overhead Rate = $420,000 / 170,000
Fabricating Department Overhead Rate = $2.47 per MH

Assembly Department Overhead Rate = $420,000 / 345,000
Assembly Department Overhead Rate = $1.22 per DLH

Answer to Requirement 4.