Question

Challenger Factory produces two similar products - regular widgets and deluxe widgets. The total plant overhead budget is $675,000 with 300,000 estimated direct labor hours. It is further estimated that deluxe widget production will need 3 direct labor hours for each unit and regular widget production will require 2 direct labor hours for each unit. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will Challenger Factory allocate to regular widget production if budgeted production for the period is 75,000 units and actual production for the period is 72,000 units?

Answer 1

Answer:

324,000 Applied Overhead Regular Widget

Explanation:

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

Remember: the overhead rate is calculated by distributing the overhead cost with a cost driver

675,000/300,000 = 2.25

$Product \times rate = Product \: overhead$

deluxe 3 labor hours  x 2.25 = 6.75 per unit

regular 2 labor hours x 2.25 = 4.50 per unit

Allocate Ovehead Regular widget

72,000 x 4.50 per unit = 324,000 Applied Overhead Regular Widget