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 Blackwelder Factory allocate to desk lamp production if actual direct hours for the period is 118,000?

Question

Quizplus · Accepted Answer

The plantwide overhead rate is calculated as follows:

Total Plant Overhead Budget / Total Estimated Direct Labor Hours
$640,000 / 400,000 = $1.60 per direct labor hour

To allocate overhead to desk lamp production, we use the following formula:

Overhead Allocated = Overhead Rate x Actual Direct Labor Hours 
$1.60 x 125,000 = $200,000

Therefore, the answer is choice letter B.

Blackwelder Factory Produces Two Similar Products - Small Lamps and Desk