Textra produces parts for a machine manufacturer. Parts go through two departments, Molding and Trimming. The company budgets overhead cost of $240,000 in the Molding department and $200,000 in the Trimming department.

 Textra produces parts for a machine manufacturer. Parts go through two departments, Molding and Trimming. The company budgets overhead cost of $240,000 in the Molding department and $200,000 in the Trimming department. The company budgets 16,000 machine hours (MH) in Molding and 25,000 direct labor hours (DLH) in Trimming. Actual production information follows.

Required:
1. Compute the plantwide overhead rate using direct labor hours as the allocation base.

2. Determine the overhead cost per unit for each part using the plantwide rate.

 

Explanation
1.
Budgeted overhead costs ($240,000 + $200,000) = $440,000
Budgeted direct labor hours (9,000 direct labor hours + 16,000 direct labor hours) = 25,000

Required:
1. Compute a departmental overhead rate for the Molding department based on machine hours and a departmental overhead rate for the Trimming department based on direct labor hours.

2. Determine the overhead cost per unit for each part using the departmental rates.

Thanks