Question

Textra Plastics produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2017 follow. (Round "OH rate and cost per unit" answers to 2 decimal places.)
Molding Trimming
Direct labor hours 52,000 DLH 48,000 DLH
Machine hours 30,500 MH 3,600 MH
Overhead costs $ 730,000 $ 590,000
Data for two special order parts to be manufactured by the company in 2017 follow:
Part A27C Part X82B
Number of units 9,800 units 54,500 units
Machine hours
Molding 5,100 MH 1,020 MH
Trimming 2,600 MH 650 MH
Direct labor hours
Molding 5,500 DLH 2,150 DLH
Trimming 700 DLH 3,500 DLH

Answer 1

Answer and Explanation:

1. The computation of the departmental overhead rate for the molding department based on machine hours and for trimming department based on direct labor hours are shown below:

For molding department

= Overhead cost ÷ machine hours

= $730,000 ÷ 30,500 machine hours    

= $23.93 per machine hour

For trimming department

= Overhead cost ÷ direct labor hours

= $590,000 ÷ 48,000 direct labor hours

= $12.29 per machine hour

2. Now the total overhead cost for Part A27C and Part X82B and its overhead cost per unit are as follows

Part A27C   Activity Departmental  For  Total Overhead  

                   Driver    OH Rate      each  Cost  

Molding Machine

                Hours $23.93  Machine        $122,065.57

                                                       Hour  (5,100 MH × 23.93 )

Trimming  Direct

                  Labor Hours $12.29 Direct           $8,604.17

                                                       Labor Hour  (700 DLH × 12.29 )

                                             Total Overheads $130,669.74 ÷ 9,800 units

                                                      Overhead per unit $13.33

Part X82B   Activity Departmental  For  Total Overhead  

                   Driver    OH Rate      each  Cost  

Molding Machine

                Hours $23.93  Machine       $24,413.11

                                                       Hour  (1,020 MH × 23.93 )

Trimming  Direct

                  Labor Hours $12.29 Direct          $43,020.83

                                                       Labor Hour (3,500 DLH × 12.29)

                                             Total Overhead  $674,33.95 ÷ 54,500 units

                                                      Overhead per unit $1.24