Answer:
Part 1.
Plantwide overhead rate for Laval using direct labor hours as a base. is $1.60 per Direct Labor Hour
Part 2.
Total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate is $78.76
Part 3. Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department.
Fabricating Assembly
Overheads (R) 390000 410000
Department Cost Driver 152000 290000
Overhead Rate 2.57 1.41
Therefore Overhead Rates are :
Fabricating Department $ 2.57 per Machine Hour
Assembly Department $1.41 per Labor Hour
Part 4. Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps.
Direct materials ($270000/21000) 12.86
Direct labor:
Fabricating department(6500/21000×$29) 8.98
Assembly department(15200/21000×$26) 18.82
Overheads:
Fabricating department(152000/21000×$2.57) 18.60
Assembly department (290000/21000×$1.41) 19.47
Total manufacturing cost per unit 78.73
Explanation:
Part 1. Plantwide overhead rate for Laval using direct labor hours as a base.
Overhead Rate = Total Overheads/Total Direct Labor Hours
= $1.60 per Direct Labor Hour
Fabricating Assembly Total
Overheads (R) 390000 410000 800000
Direct Labor Hrs 210000 290000 500000
Overhead Rate 1.60
Part 2. Total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate
Direct materials ($270000/21000) 12.86
Direct labor:
Fabricating department(6500/21000×$29) 8.98
Assembly department(15200/21000×$26) 18.82
Overheads:
Fabricating department(210000/21000×$1.60) 16.00
Assembly department (290000/21000×$1.60) 22.10
Total manufacturing cost per unit 78.76
Part 3. Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department.
Part 4. Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps.
.Therefore,initially Bill diner's opportunity cost of an additional hot dog is 1.4 units of burger.
approximately.Hence,Bill's diner is willing to sacrifice approximately 0.385 units of burger to consume an additional unit of hot dog.
units of burger.Notice,that here the opportunity cost of additional hot dog decreased from 1.4 units of burger to 0.385 units of burger as Bill's diner changed the consumption combination of both burgers and hot dogs.