Crinkle Cut Clothes Company manufactures two products CC1 and CC2.Current direct material and direct labor costs are detailed below.Next year the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base.Next year's overhead is estimated to be $338,250.The direct labor and direct materials costs are estimated to be consistent with the current year.Direct labor costs $28 per hour and the company expects to manufacture 22,000 units of CC1 and 91,000 units of CC2 next year. $$\begin{array} { | l | c | c | }
\hline & \begin{array} { c }
\text { Direct } \
\text { Material } \
\text { per Urit }
\end{array} & \begin{array} { c }
\text { Direct } \
\text { Labor Dollars } \
\text { per Urit }
\end{array} \
\hline \text { CC1 } & \$ 37.10 & \$ 22.40 \
\hline \text { CC2 } & \$ 25.20 & \$ 15.40 \
\hline
\end{array}$$ Compute the plantwide overhead rate for next year.

Question

Crinkle Cut Clothes Company manufactures two products CC1 and CC2.Current direct material and direct labor costs are detailed below.Next year the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base.Next year's overhead is estimated to be $338,250.The direct labor and direct materials costs are estimated to be consistent with the current year.Direct labor costs $28 per hour and the company expects to manufacture 22,000 units of CC1 and 91,000 units of CC2 next year. $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { Direct } \
\text { Material } \
\text { per Urit }
\end{array} & \begin{array} { c } 
\text { Direct } \
\text { Labor Dollars } \
\text { per Urit }
\end{array} \
\hline \text { CC1 } & \$ 37.10 & \$ 22.40 \
\hline \text { CC2 } & \$ 25.20 & \$ 15.40 \
\hline
\end{array}$$ Compute the plantwide overhead rate for next year.

Quizplus · Accepted Answer

The plantwide overhead rate is calculated by dividing the total estimated overhead by the total estimated direct labor hours. First, calculate the direct labor hours for each product: CC1: $22.40 / $28 per hour = 0.8 hours per unit; CC2: $15.40 / $28 per hour = 0.55 hours per unit. Then, calculate the total direct labor hours: (22,000 units * 0.8 hours) + (91,000 units * 0.55 hours) = 17,600 + 50,050 = 67,650 hours. Finally, divide the total overhead by the total direct labor hours: $338,250 / 67,650 hours = $5.00 per DLH.

Crinkle Cut Clothes Company Manufactures Two Products CC1 and CC2