Question

Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $830,466, using 439,400 direct labor hours. The factory overhead budget for the Assembly Department is $506,466, using 67,800 direct labor hours.

If a table lamp requires 4 hours of fabrication and 7 hour of assembly, the amount of factory overhead that Kaumajet Factory will allocate to each unit of table lamp using the multiple production department factory overhead rate method with an allocation base of direct labor hours is

a.$19.72

b.$7.47

c.$216.89

d.$59.85

Answer 1

Answer is as follows:

Correct Option : d. $59.85

Calculation of Departmental Overhead rates:

1. Factory Overhead Rate for Fabrication Department: Overhead Budget / Direct Labour hours

= $830,466 / $439,400

= $1.89 per labour hour

2. Factory Overhead Rate for Assembly Department: Overhead Budget / Direct Labour Hours

= $506,466 / $67800

= $7.47 per labour hour

Calculation of factory overhead rate allocated to each unit of table lamp with an allocation base of direct labour hours:

Cost of 4 hours of Fabrication = 4 hours * $1.89 = $07.56

Cost of 7 hours of Assembly = 7 hours * $ 7.47 = $52.29

Total Overhead Rate = $7.56 + $52.29 =$ 59.85