Dade Metals manufactures patio furniture. The company budgets overhead cost of $400,000 for the year. It also budgets 20,000 machine hours and 5,000 direct labor hours.

 Dade Metals manufactures patio furniture. The company budgets overhead cost of $400,000 for the year. It also budgets 20,000 machine hours and 5,000 direct labor hours.
 
1. Compute the plantwide overhead rate, assuming the company allocates overhead based on (a) machine hours and (b) direct labor hours.

2a. Job 121 uses 100 machine hours and 50 direct labor hours. Allocate overhead to Job 121 assuming overhead is allocated based on machine hours.

2b. Job 121 uses 100 machine hours and 50 direct labor hours. Allocate overhead to Job 121 assuming overhead is allocated based on direct labor hours.

 

Explanation
1.
a. Plantwide overhead rate = $400,000/20,000 MH = $20 per MH
b. Plantwide overhead rate = $400,000/5,000 DLH = $80 per DLH