Question

Comparing costs under ABC to traditional plantwide overhead rate LO P1, P3 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 of 200 pounds 800 pounds
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:

Chairs= $2.805

Tables= $2.25

Explanation:

Giving the following information:

Hazardous waste disposal costs= $630,000

Production:

Chairs= 211,000

Tables= 17,000 units

Direct labor hours required:

Chairs= 254,000 DLH

Tables= 16,400 DLH

Total DLH= 270,400

First, we need to calculate the estimated overhead rate:

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

Estimated manufacturing overhead rate= 630,000/ 270,400

Estimated manufacturing overhead rate= $2.33 per direct labor hour

Now, we can allocate overhead to each product line:

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

Chairs= 2.33*254,000= $591,820

Tables= 2.33*16,400= $38,212

Finally overhead per unit:

Chairs= 591,820/211,000= $2.805

Tables= 38,212/17,000= $2.25