Lewis Company manufactures two models of pens, a standard and a deluxe model.Three activities have been identified as cost drivers and the related overhead costs pooled together to arrive at the following information: $\begin{array}{cccc}
& \begin{array}{c}
\text { Number } \
\text { of }
\end{array} & \begin{array}{c}
\text { Number } \
\text { of }
\end{array} & \begin{array}{c}
\text { Number } \
\text { of }
\end{array} \
\text { Product } & \text { Setups } & \text { Components } & \text { DLH }\\hline
\text { Standard } & 20 & 15 & 375 \
\text { Deluxe } & 30 & 45 & 225 \
& & & \
\text { Costs per pool } & \$ 25,000 & \$ 36,000 & \$ 15,000
\end{array}$ If a traditional costing system is used, _____ is the overall overhead rate using direct-labor hours.
A)$500
B)$150
C)$60
D)$127

Question

Lewis Company manufactures two models of pens, a standard and a deluxe model.Three activities have been identified as cost drivers and the related overhead costs pooled together to arrive at the following information: $\begin{array}{cccc} 
& \begin{array}{c}
\text { Number } \
\text { of }
\end{array} & \begin{array}{c}
\text { Number } \
\text { of }
\end{array} & \begin{array}{c}
\text { Number } \
\text { of }
\end{array} \
\text { Product } & \text { Setups } & \text { Components } & \text { DLH }\\hline
\text { Standard } & 20 & 15 & 375 \
\text { Deluxe } & 30 & 45 & 225 \
& & & \
\text { Costs per pool } & \$ 25,000 & \$ 36,000 & \$ 15,000
\end{array}$ If a traditional costing system is used, _____ is the overall overhead rate using direct-labor hours.
A)$500
B)$150
C)$60
D)$127

Quizplus · Accepted Answer

The overall overhead rate using direct-labor hours is $127. This is calculated by dividing the total overhead costs by the total direct-labor hours. In this case, the total overhead costs are $76,000 and the total direct-labor hours are 600. Therefore, the overall overhead rate is $76,000 / 600 = $127.

Lewis Company Manufactures Two Models of Pens, a Standard and a Deluxe