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Laval produces lamps and home lighting fixtures
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.
Expert Solution
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 |
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