Question

Single plantwide factory overhead rate Bach Instruments Inc. makes three musical instruments: flutes, clarinets, and oboes. The budgeted factory overhead cost is $126,480. Overhead is allocated to the three products on the basis of direct labor hours. The products have the following budgeted production volume and direct labor hours per unit: Budgeted Production Volume Direct Labor Hours Per Unit Flutes 2,100 units 0.4 Clarinets 800 1.5 Oboes 1,400 1.2 If required, round all per unit answers to the nearest cent. a. Determine the single plantwide overhead rate. $ per direct labor hour b. Use the overhead rate in (a) to determine the amount of total and per-unit overhead allocated to each of the three products. Total Factory Overhead Cost Per Unit Factory Overhead Cost Flutes $ $ Clarinets Oboes Total $

Answer 1

Answer:

Bach Instruments Inc.

a. Single plantwide factory overhead rate:

= Total overhead/total labor hours = $126,480/3,720 = $34 per hour

b. Total Factory Overhead Cost

                   Labor      Per Unit Cost         Product units  Total Costs

                   Hours   (Labor hours x $34)                          per product

Flutes            0.4             $13.60                   2,100            $28,560

Clarinets        1.5               51.00                       800             40,800

Oboes           1.2               40.80                    1,200               57,120

Total                                                                                  $126,480

Explanation:

a) Data & Calculations:

Budgeted factory overhead = $126,480

                         Budgeted             Direct labor    Total      

               Production Volume    hours per unit    Hours

Flutes           2,100 units                   0.4                 840

Clarinets        800                             1.5               1,200

Oboes         1,400                             1.2               1,680

Total hours                                                          3,720

c) Plantwide overhead allocation per unit = $126,480/3,720 = $34

d) The plantwide overhead rate is the dividend from total overhead costs and total labor hours.  This rate is applied to the products based on the number of hours used to product a unit to obtain the per unit cost rate for each product.  The resulting rate is further applied to the units produced in each product type to get the total cost of overhead for each product.