Question

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 34,000 desk lamps produced annually follows.

Direct materials $270,000
Direct labor
Fabricating department (6,500 DLH × $29 per DLH) $188,500
Assembly department (15,200 DLH × $26 per DLH) $395,200
Machine hours
Fabricating department 15,000MH
Assembly department 20,450MH


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

Fabricating Assembly
Direct labor hours 210,000 DLH 290,000DLH
Machine hours 152,000 MH 124,000 MH
Overhead cost $390,000 $410,000

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.

Answer 1

Answer:

Determine the plantwide overhead rate for Laval using direct labor hours as a base.  

1. Estimated overhead costs  $800,000  $1.60  per direct labor hour

Estimated direct labor hours  500,000  

2. Determine the total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate.

Direct Labor - Assembly  $188,500

Direct Labor - Fabricating  395,200

Direct materials  270,000

Overhead  34,720

Total manufacturing costs  888,420

Units produced  22000

Manufacturing cost per unit  40.38

3.  Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department.

                    Departmental overhead rate  

Fabricating  390000/152000 = 2.57  MH

Assembly  410000/290000 = 1.41  DLH  

4.  Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps.    

Direct materials                                                         270000  

Direct labor    

Fabricating                                   188500  

Assembly                                   395200  

                                                                                 583700

                                                                                       0

Overhead    

Fabricating (15000*2.57)               38550  

Assembly (15200*1.41)                        21432  

                                                                                       59982

                                                                                            0

Total manufacturing cost                                                  913682

Units produced                                                                    22000

Manufacturing cost per unit                                                41.53  per unit