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Craft Pro Machining produces machine tools for the construction industry
Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.
Production ActivityIndirect Labor Indirect Materials Other OverheadGrinding$340,000 Polishing $135,000 Product modification 650,000 Providing power $260,000 System calibration 450,000
Additional information on the drivers for its production activities follows.
Grinding20,000machine hoursPolishing20,000machine hoursProduct modification2,200engineering hoursProviding power20,000direct labor hoursSystem calibration1,250batches
Job 3175Job 4286Number of units200units2,500unitsMachine hours350MH3,500MHEngineering hours30eng. hours18eng. hoursBatches30batches90batchesDirect labor hours450DLH4,050DLH
Required:
5. If the company uses a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286?
(ALL I NEED IS THE OH COST PER UNIT FOR JOB 3175 AND JOB 4286, AS WELL AS THE OVERHEAD COST/DIRECT LABOUR HOURS)
Expert Solution
Plantwide overhead rate = Total overhead cost / Total direct labor hours
= $1,835,000 / 20,000 direct labor hours
Plantwide overhead rate = $91.75 per direct labor hour
| Computation of Overhead cost: | |
| Grinding | 340000 |
| Polishing | 135000 |
| Product modification | 650000 |
| Providing power | 260000 |
| System calibration | 450000 |
| Total overhead cost | 1835000 |
| Product | Direct Labor | Plantwide Overhead Rate | Total Overhead Cost | Units Produced | Overhead Cost per Unit |
| Job 3175 | 450 | $91.75 | $41,287.50 | 200 | $206.44 |
| Job 4286 | 4,050 | $91.75 | $371,587.50 | 2,500 | $148.64 |
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