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 35,000 desk lamps produced annually follows. $260,000 Direct materials Direct labor Fabricating department (6,500 DLH * $32 per DLH) Assembly department (16,600 DLH * $21 per DLH) Machine hours Fabricating department Assembly department $208,000 $348,600 15,300 MH 20, 650 MH Expected overhead cost and related data for the two production departments follow. Direct labor hours Machine hours Overhead cost Fabricating Assembly 170.000 DLH 380,000 DLH 163,000 MH130,000 MH $320,000 $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

1) plantwide overhead rate = total overhead cost/direct labor hours
plantwide overhead rate = (320000+410000)/(170000+380000)
plantwide overhead rate = 730000/550000= 1.32
2) Manufacturing cost per unit
Direct material				260000
Direct labor
fabricating department				208000
assembly department				348600
overhead applied (23100*1.32)				30492
Total manufacturing cost				847092
Unit production				35000
Unit cost				24.20
3) department overhead rate
Fabricating = overhead cost/machine hours
fabricating = 320000/163000 = 1.96 per MH
Assembly = overhead cost/direct labor hours
assembly = 410000/380000 = 1.08 per DLH
4) manufacturing cost per unit
Direct material				260000
Direct Labor
fabricating department				208000
assembly department				348600
Overhead applied (1.96*15300)+(1.08*16600)				47916
Total manufacturing overhead				864516
units				35000
unit cost				24.70

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