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Laval produces lamps and home lighting fixtures

Accounting

Laval produces lamps and home lighting fixtures. Its most popular product is a brushed aluminum desk lamp. This lamp is made from components shaped in the fabricating department and assembled in the assembly department. Information related to the 20,000 desk lamps produced annually follows. 
Direct materials $255,000 Direct labor Fabricating department (6,000 DLH $24 per DLH) $144,000 Assembly department (15,600 DLH $24 per DLH) $374,400 Machine hours Fabricating department 14,200 MH Assembly department 20,900 MH 
Expected overhead cost and related data for the two production departments follow. 
Direct labor hours Machine hours Overhead cost 
Fabricating Assembly 200,000 DLH 275,000 DLH 166,000 MH 132,000 MH $420,000 $415,000 
Required 1. Determine the plantwide overhead rate for Laval using direct labor hours as a base. 2. Determine the total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate. 3. Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department. 4. Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps. 
 

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Computation of Plantwide overhead rate for Laval using direct labor hours as a base:

Estimated overhead costs ($420,000+$415,000) $835,000   $1.76   per direct labor hour
Estimated direct labor hours (200,000+275,000) 475,000   = $835,000/475,000

 

Computation of Total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate:

 

Direct Labor - Assembly $144,000  
Direct Labor - Fabricating 374,400
Direct materials 255,000
Overhead ((6,000+15,600)*$1.76) 38,016
   
Total manufacturing costs 811,416
Units produced 20,000
Manufacturing cost per unit 40.57

Computation of departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department:

  Departmental overhead rate  
Fabricating ($420,000/166,000) 2.53 per machine hour
Assembly ($415,000/275,000) 1.51 per direct labor hour

Computation of total manufacturing cost per unit for the aluminum desk lamps:

 

 Direct Materials   $255,000  
Direct labor    
Fabricating $144,000   
Assembly 374400  
    $518,400 
     
Overhead    
Fabricating (14,200*2.53) 35926  
Assembly (20,900*1.51) 31559  
    67485
     
Total manufacturing cost   $840,885 
Units produced   20,000
Manufacturing cost per unit   $42.04