Question

Textra Plastics produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2017 follow.

	Molding			Trimming
Direct labor hours		51,000	DLH		50,000	DLH
Machine hours		33,500	MH		4,200	MH
Overhead costs	$	800,000		$	600,000

  
Data for two special order parts to be manufactured by the company in 2017 follow.

	Part A27C			Part X82B
Number of units		10,000	units		54,000	units
Machine hours
Molding		5,300	MH		1,060	MH
Trimming		2,600	MH		650	MH
Direct labor hours
Molding		4,000	DLH		2,450	DLH
Trimming		500	DLH		2,500	DLH

Required
1. Compute the plantwide overhead rate using direct labor hours as the base.
2. Determine the overhead cost assigned to each product line using the plantwide rate computed in requirement 1.

Answer 1

1)Plantwide overhead rate =Estimated overhead /Estimated direct labor hours

	Molding	+	Trimming	=	Total
Overhead cost	800000		600000		1400000
Direct labor hours	51000		50000		101000
Plantwide overhead rate					1400000/101000 =$ 13.86139 (rounded to 13.86 per DLH)

2)

Part	Total Direct labor hours used in Both operations	plantwide overhead rate	*	Actual Direct labor Hours	=	Overhead assigned
A27C	4000+500=4500	13.86139		4500		62376.26 (rounded to 62376)
X82B	2450+2500=4950	13.86139		4950		68613.88 (rounded to 68614 )