Question

Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 40,000 units next year and Product L is expected to sell 8,000 units. A unit of either product requires 0.4 direct labor-hours. The company's total manufacturing overhead for the year is expected to be $1,632,000. 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

Answer 1

Answer:

Product L= $34

Product H= $34

Explanation:

Giving the following information:

Product H is expected to sell 40,000 units next year and Product L is expected to sell 8,000 units.

A unit of either product requires 0.4 direct labor-hours.

Estimated overhead= $1,632,000. R

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= 1,632,000/(48,000*0.4)

Estimated manufacturing overhead rate= $85 per direct labor hour

Now, we can allocate overhead:

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

Product L= 85*0.4= $34

Product H= 85*0.4= $34