Question

The Kaumajet Factory produces two products - table lamps and desk lamps. It has two separate departments - Finishing and Production. The overhead budget for the Finishing Department is $815,304, using 443,100 direct labor hours. The overhead budget for the Production Department is $329,467 using 57,100 direct labor hours.

If the budget estimates that a desk lamp will require 3 hours of finishing and 6 hours of production, how much factory overhead will the Kaumajet Factory allocate to each unit of desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours?

a. $5.77

b. $20.05

c. $180.43

d. $40.14

Answer 1

The correct answer is $40.14.

Supporting Calculations:

Factory overhead rate of Finishing Department = Budgeted Overhead/Direct labor hours

= $815,304/443,100

= $1.84 per direct labor hour

Factory overhead rate of Production Department = Budgeted Overhead/Direct labor hours

= $329,467/57,100

= $5.77 per direct labor hour

Factory overhead allocated = (Factory overhead rate of Finishing Department * 3 hours of Finishing) + (Factory overhead rate of Production Department * 6 hours of Finishing)

= ($1.84 per direct labor hour * 3 hours) + ($5.77 per direct labor hour * 6 hours)

= $5.52 + $34.62

= $40.14

Therefore, factory overhead allocated is $40.14.