Question

Shaver Co. manufactures a variety of electric razors for men and women. The company's plant is partially automated. Listed below is cost driver information used in the product-costing system:

Overhead Cost Pool	Budgeted Overhead Cost			Budgeted Cost Driver Level		Cost Driver
Machinery depreciation/maintenance	$	168,640		27,200		Machine hours
Factory depreciation/utilities/insurance		127,840		27,200		Machine hours
Product design		554,400		38,500		Hours in design
Material handling		1,078,000		134,750		Pounds of raw materials

In addition, Shaver expects to spend $514,368 for 8,037 direct labor-hours. Two current product orders had the following requirements:

	Men’s Razors			Women’s Razors
Units produced and sold		20,000			26,000
Direct labor hours		30			40
Pounds of raw materials		860			750
Hours in design		20			23
Machine hours		65			50

What is the total manufacturing overhead assigned to the current order for Women's Razors if the firm uses a volume-based plant wide overhead rate based on direct labor hours?

Multiple Choice

• $150.00.

• $12,000.00.

• $112.50.

• $9,600.00.

• $187.50.

Answer 1

Answer:

overhead rate based on the direct labor dollars= $9,600

Working notes for the above answer is as under

Overhead rate

=Total overhead Cost /Total direct labor cost

=($168,640 + $127,840 + $554,400 + $1,078,000)/$514,368

= 375% per direct-labor dollar.

=$514,368/8,037

= $64 per DL hour.

$64 x 40 direct labor hours

= $2,560.

2,560 x 375%

= $9,600