Question

LO 6.1TyeDye Lights makes two products: Party and Holiday. It takes 80,900 direct labor hours to manufacture the Party Line and 93,500 direct labor hours to manufacture the Holiday Line. Overhead consists of $225,000 in the machine setup cost pool and $149,960 in the packaging cost pool. The machine setup pool has 52,000 setups for the Party product and 98,000 setups for the Holiday product. The packaging cost pool has 26,000 parts in the Party product and 39,200 parts for the Holiday product. Using the traditional cost method of direct labor hours, what is the predetermined overhead rate?
$1.50 per direct labor hour
$2.15 per direct labor hour
$2.30 per direct labor hour
$3.80 per direct labor hour

Answer 1

Answer:

The correct answer is B.

Explanation:

Giving the following information:

It takes 80,900 direct labor hours to manufacture the Party Line and 93,500 direct labor hours to manufacture the Holiday Line. Overhead consists of $225,000 in the machine setup cost pool and $149,960 in the packaging cost pool.

We need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= (225,000 + 149,960) / (80,900 + 93,500)= $2.15 per direct labor hour