Question

Blackwelder Factory produces two similar products - small lamps and desk lamps. The total plant overhead...

Blackwelder Factory produces two similar products - small lamps and desk lamps. The total plant overhead budget is $640,000 with 400,000 estimated direct labor hours. It is further estimated that small lamp production will require 275,000 direct labor hours and desk lamp production will need 125,000 direct labor hours.

Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will Blackwelder Factory allocate to desk lamp production if actual direct hours for the period is 118,000?

a.$118,000

b.$125,000

c.$188,800

d.$200,000

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    Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below.
    Activity Cost Activity Base
    Procurement $370,000 Number of purchase orders
    Scheduling 250,000 Number of production orders
    Materials handling 500,000 Number of moves
    Product development 730,000 Number of engineering changes
    Production 1,500,000 Machine hours
    Number of
    Purchase
    Orders    		 Number of
    Production
    Orders    		 Number
    of
    Moves    		 Number of
    Engineering
    Changes
    Machine
    Hours    		 Number
    of
    Units
    Disk drives 4,000 300 1,400 10 2,000 2,000
    Tape drives 4,000 150 800 10 8,000 4,000
    Wire drives 12,000 800 4,000 25 10,000 2,500

    Determine the activity rate for materials handling per move.

    a.$80.65

    b.$50.00

    c.$20.83

    d.$58.82

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Answer #1

Part 1

Estimated overheads = $640,000

Estimated direct labor hour = 400,000

Predetermined overhead rate = Estimated overheads/Estimated direct labor hour

= 640,000/400,000

= $1.6 per direct labor hour

Overhead allocate to desk lamp production = Actual direct labor hour used x Predetermined overhead rate

= 118,000 x 1.6

= $188.800

Correct option is (c)

Part 2

Total number of moves = Moves used in disk drives + Moves used in tape drive + Move used in wire drive

= 1,400 + 800 + 4,000

= 6,200

material handling cost = $500,000

Actual rate for material handling per move = material handling cost/Total number of moves

= 500,000/6,200

= $80.65

Correct option is (a)

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