The Hampshire Company produces 9 volt batteries and AAA batteries. The Hampshire Company uses a plant-wide rate to apply overhead based on direct labour hours. The following data is given:
$\begin{array}{|c|c|}
\hline \text { Actual overhead } & \$ 325,000 \
\hline \text { Estimated overhead } & \$ 350,000 \
\hline \text { Estimated activity: } & \
\hline \text { 9 volt battery } & 100,000 \quad \text { direct labour hours } \
\hline \text { AAA battery } & 400,000 \text { direct labour hours } \\hline \text { Actual activity: } & \
\hline 9 \text { volt battery } & 125,000 \quad \text { direct labour hours } \
\hline \text { AAA battery } & 400,000 \quad \text { direct labour hours } \\hline \text { Units produced: } & \
\hline 9 \text { volt battery } & 500,000 \
\hline \text { AAA battery } & 250,000 \
\hline
\end{array}$
-Refer to the figure.How much overhead is applied to 9 volt batteries and AAA batteries (rounded to two decimal places),respectively?

Question

Quizplus · Accepted Answer

The overhead rate is calculated based on estimated figures. The estimated overhead is $350,000, and the total estimated direct labor hours are 500,000 (100,000 for 9 volt + 400,000 for AAA). So, the overhead rate per direct labor hour is $350,000 / 500,000 = $0.70 per hour. For 9 volt batteries, the actual direct labor hours are 125,000, so the applied overhead is 125,000 hours * $0.70 = $87,500. For AAA batteries, the actual direct labor hours are 400,000, so the applied overhead is 400,000 hours * $0.70 = $280,000.

The Hampshire Company Produces 9 Volt Batteries and AAA Batteries