Blackwelder Factory produces two similar products - small lamps and desk lamps. The total plant overhead budget is $640,000 with 400,000 estimated direct labor hours. It is further estimated that small lamp production will require 275,000 direct labor hours and desk lamp production will need 125,000 direct labor hours. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will be allocated to the desk lamp production if the actual direct hours for the period is 118,000?
A) $118,000
B) $200,000
C) $188,800
D) $125,000

Question

Quizplus · Accepted Answer

To calculate the plantwide factory overhead rate, we divide the total plant overhead budget by the estimated total direct labor hours:

Plantwide factory overhead rate = Total plant overhead budget / Estimated total direct labor hours
Plantwide factory overhead rate = $640,000 / 400,000 hours
Plantwide factory overhead rate = $1.60 per direct labor hour

To allocate overhead to the desk lamp production, we multiply the actual direct labor hours for desk lamps by the plantwide factory overhead rate:

Overhead allocated to desk lamp production = Actual direct labor hours for desk lamps x Plantwide factory overhead rate
Overhead allocated to desk lamp production = 125,000 hours x $1.60 per direct labor hour
Overhead allocated to desk lamp production = $200,000

Therefore, the best choice is C - $188,800.

Blackwelder Factory Produces Two Similar Products - Small Lamps and Desk