Question

Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 39,000 units next year and Product L is expected to sell 8,000 units. A unit of either product requires 0.81 direct labor-hours.
The company's total manufacturing overhead for the year is expected to be $1,800,000
Required:
1-a.
The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product? (Do not round intermediate calculations.Round your answers to 2 decimal places.)

Answer 1

Answer:

Each product will be allocated with 38.30 dollars of manufacturing overhead as both takes 0.81 DLH

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

To calcualte the overhead rate we need to distribute the expected cost over the expected cost driver, in this case, labor hours:

(39,000 + 8,000) x 0.81 DLH = 38,070 labor hous

$1,800,000 overhead / 38,070 DLH =  47,281323877

the overhead per hour is $47.28

overhead per product:

47,281323877 x 0.81 = 38,29787234 = 38.30