Question

Smythe Co. makes furniture. The following data are taken from its production plans for the year. Direct labor costs $ 5,870,000 Hazardous waste disposal costs 630,000 Chairs Tables Expected production 211,000 units 17,000 units Direct labor hours required 254,000 DLH 16,400 DLH Hazardous waste disposed 200 pounds 800 pounds Required: 1. Determine the hazardous waste disposal cost per unit for chairs and for tables if costs are assigned using a single plantwide overhead rate based on direct labor hours

Answer 1

Answer:

$2.80 per chair

$2.25 per table

Explanation:

If cost is assigned at a rate based on direct labor hours, the total disposal cost for chairs and tables is, respectively:

$D_c=\frac{254,000}{16,400+254,000}*\ 630,000=\ 591,789.94\\D_t=\frac{16,400}{16,400+254,000}*\ 630,000=\ 38,210.06$

The respective disposal cost per unit is:

$C = \frac{\ 591,789.94}{211,000}=\ 2.80/chair\\ T=\frac{\ 38,210.06}{17,000}=\ 2.25/ table$

Answer 2

Answer:

Pre-determined

over head rate = Total overhead ÷ Total direct labor hours

                       = 630,000   ÷   270,000 (254,000 + 16400)

                       = $2.33 per hour

Product    Activity    OH per DLH    Total OH      Units       OH cost

                Driver                                              Produced   per unit        

Chairs      254000       $2.33         $591,820        211000     $2.80

Tables     16400           $2.33          $38,212          17000     $2.25