Question

Textra Plastics produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2017 follow.
Molding Trimming
Direct labor hours 52,000 DLH 48,000 DLH
Machine hours 30,500 MH 3,600 MH
Overhead costs $730,000 $590,000

Data for two special order parts to be manufactured by the company in 2017 follow.

Part A27C Part X82B
Number of units 9,800 units 54,500 units
Machine hours Molding 5,100 MH 1,020 MH
Trimming 2,600 MH 650 MH
Direct labor hours Molding 5,500 DLH 2,150 DLH
Trimming 700 DLH 3,500 DLH

Required:
a. Compute the plantwide overhead rate using direct labor hours as the base.
b. Determine the overhead cost assigned to each product line using the plantwide rate computed in requirement a.

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Molding Trimming

Direct labor hours 52,000 DLH 48,000 DLH= 100,000

Overhead costs $730,000 $590,000= $1,320,000

First, we need to calculate the plantwide predetermined overhead rate:

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

Predetermined manufacturing overhead rate= 1,320,000/100,000

Predetermined manufacturing overhead rate= $13.2 per direct labor hour

Now, we can allocate overhead to each product line:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Part A27C Part X82B

Direct labor hours Molding 5,500 DLH 2,150 DLH

Part A27C:

Allocated MOH= 5,500*13,2= $72,600

Part X82B:

Allocated MOH= 2,150*13.2= $28,380