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.
$$\begin{array} { | l | c | c | }
\hline & \begin{array} { c }
\text { Direct } \
\text { Material } \
\text { per Unit }
\end{array} & \begin{array} { c }
\text { Direct } \
\text { Labor Dollars } \
\text { per Unit }
\end{array} \
\hline \text { CC1 } & \$ 37.10 & \$ 22.40 \
\hline \text { CC2 } & \$ 25.20 & \$ 15.40 \
\hline
\end{array}$$
Compute the plantwide overhead rate for next year.
A) $28.00 per DLH.
B) $37.80 per DLH.
C) $1.35 per DLH.
D) $5.00 per DLH.
E) $.20 per DLH.

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.
$$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { Direct } \
\text { Material } \
\text { per Unit }
\end{array} & \begin{array} { c } 
\text { Direct } \
\text { Labor Dollars } \
\text { per Unit }
\end{array} \
\hline \text { CC1 } & \$ 37.10 & \$ 22.40 \
\hline \text { CC2 } & \$ 25.20 & \$ 15.40 \
\hline
\end{array}$$
Compute the plantwide overhead rate for next year.
A) $28.00 per DLH.
B) $37.80 per DLH.
C) $1.35 per DLH.
D) $5.00 per DLH.
E) $.20 per DLH.

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 = 0.8 hours per unit; CC2: $15.40 / $28 = 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