Question

Laval produces lamps and home lighting fixtures. Its most popular product is a brushed aluminum desk...

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 36,000 desk lamps produced annually follows.

Direct materials $ 260,000
Direct labor
Fabricating department (6,500 DLH × $26 per DLH) $ 169,000
Assembly department (15,600 DLH × $25 per DLH) $ 390,000
Machine hours
Fabricating department 15,200 MH
Assembly department 20,800 MH

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

Fabricating Assembly
Direct labor hours 220,000 DLH 245,000 DLH
Machine hours 162,000 MH 133,000 MH
Overhead cost $ 390,000 $ 425,000

  
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.

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Homework Answers

Answer #1

1. Total direct labor hrs for both departments = 220,000 + 245,000 = 465,000

Total overhead cost = 390,000 + 425,000 = 815,000

Plantwide overhead rate on the basis of direct labor hrs = 815,000/ 465,000

= $1.75 per hr

2.

Direct materials 260,000
Direct labor
- Fabricating 169,000
- Assembly 390,000
Overhead [(6,500 + 15,600) x 1.75] 38,675
Total mfg cost 857,675
Units produced 36,000
Mfg cost per unit $23.82

3. Fabricating = Overhead cost/ Total machine hrs

= 390,000/ 162,000

= 2.41

Assembly = Overhead cost/ Total labor hrs

= 425,000/ 245,000

= 1.73

4.

Direct materials 260,000
Direct labor
- Fabricating 169,000
- Assembly 390,000
Overhead [(6,500 + 15,600) x 1.75] 38,675
- Fabricating [15,200 x 2.41] 36,632
- Assembly [20,800 x 1.73] 35,984
Total mfg cost 930,291
Units produced 36,000
Mfg cost per unit $25.84
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