Question

A company allocates $7.50 overhead to each unit produced. the company uses a Plantwide overhead rate with direct labor hours as the allocation base. given the amounts below, how many direct labor hours does the company expect in department 2?
department 1 : manufacturing overhead costs $74,358
direct labor hours 6,610 DLH and machine hours 700 MH
department 2 : manufacturing overhead costs $49,572
direct labor hours ?? DLH and machine hours 800 MH
A. 9,914 DLH
B. 6,612 DLH
C. 3,109 DLH
D. 7,454 DLH
E. 16,254 DLH

Answer 1

Answer: Option (A) is correct.

Explanation:

Given that,

overhead to each unit produced = $7.50

Department 1:

Manufacturing overhead costs  = $74,358

Direct labor hours (DLH) = 6,610

Machine hours = 700 MH

Department 2 :

Manufacturing overhead costs = $49,572

Machine hours = 800 MH

Total Overheads = Manufacturing overhead cost of department 1 + Manufacturing overhead cost of department 2

                            = $74,358 + $49,572

                            = $123,930

Total Direct Labor Hours:

$= \frac{Total\ overhead}{per\ unit\ overhead}$

$= \frac{123,930}{7.50}$

= 16,524

Direct Labor Hours for Department 2:

= Total Direct Labor Hours - Direct labor hours of department 1

= 16,524 - 6,610

= 9,914 DLH