Question

The total factory overhead for Big Light Company is budgeted for the year at $807,500. Big Light manufactures two different products: night lights and desk lamps. Night lights are budgeted for 60,000 units. Each night light requires 1/2 hour of direct labor. Desk lamps are budgeted for 80,000 units. Each desk lamp requires 2 hours of direct labor.

a. Determine the total number of budgeted direct labor hours for year.
_______direct labor hours
b. Determine the single plantwide factory overhead rate using direct labor hours as the allocation base. Round your answer to two decimal places, if necessary.
$_____ per direct labor hour
c. Determine the factory overhead allocated per unit for each product using the single plantwide factory overhead rate calculated in (b). Round your answers to two decimal places, if necessary.
Night Lights $_________ per unit
Desk Lamps $_________ per unit

Answer 1

Answer:

a. 190,000 direct labor hours

b. $4.25 per direct labor hour

c. Night Lights $2.13 per unit

   Desk Lamps $8.5 per unit

Explanation:

a. To determine to number of budgeted hours for the year we calculate as,

Night Lights = 30,000 hours (60,000 units * 0.5 hour of direct labor per unit)

Desk Lamps = 160,000 hours (80,000 units * 2 hours of direct labor per unit)

Total budgeted direct labor hours for the year = 190,000 hours (30,000 hours +160,000 hours)

b. To determine plantwide factory overhead rate using direct labor hour we calculate as;

Total Factory overheads / Total budgeted direct labors

$807,500 / 190,000 = $4.25 per direct labor hour

c. To determine factory overhead rate per unit for each product we calculate as;

Night Lights: plantwide overhead rate * labor hour per unit of night lights

                      = $4.25 per direct labor hour * 0.5 labor hour per unit

                     = $2.13 per unit.

Desk Lamps: plantwide overhead rate * labor hour per unit of desk lamps

                      = $4.25 per direct labor hour * 2 labor hours per unit

                     = $8.5 per unit.