Question

Flawless Cosmetic Company manufactures and distributes several different products. The company currently uses a plantwide allocation...

Flawless Cosmetic Company manufactures and distributes several different products. The company currently uses a plantwide allocation method for allocating overhead at a rate of $8 per direct labor hour. Loren is the department manager of the Makeup Department that produces Products – Concealer (C) and Glow Cream (GC). Jennifer is the department manager of the Hair Care Department that manufactures Product – Shampoo (S). The product costs (per case of 24 bottles) and other information are as follows:

Products
C GC S
Direct materials $ 105.00 $ 68.00 $ 50.00
Direct labor 40.00 30.50 13.00
Overhead 26.00 24.00 12.00
$ 171.00 $ 122.50 $ 75.00
Machine hours 5 3 4
Number of cases (per year) 300 500 600

Based on this information, if Flawless changes its allocation basis to machine hours, what is the overhead rate per machine hour?

$3.00

$24.00

$4.00

$5.00
Business   Accounting   
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Answer #1
Total Overheads:
Product Oh per unit Units Total Oh
Concealer 26 300 7800
Glow cream 24 500 12000
Shampoo 12 600 7200
Total Overheads: 27000
Total MH
Product MH per unit Units Total Oh
Concealer 5 300 1500
Glow cream 3 500 1500
Shampoo 4 600 2400
Total MH 5400
Overheads rate per MH:
Total Overheads 27000
Divide: Total MH 5400
OH rate per MH 5 per MH
Answer is $ 5.00
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