Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an inexpensive desktop under the label Outstanding Computers.The two products use two overhead activities, with the following costs:
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production.

- Calculate the overhead cost per unit for Excellent Laptops using a plantwide rate based on direct labor costs.(Note: Round answer to two decimal places.)
A) $9.63 per laptop
B) $22.45 per laptop
C) $4.25 per laptop
D) $7.22 per laptop
E) $7.50 per laptop

Question

Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an inexpensive desktop under the label Outstanding Computers.The two products use two overhead activities, with the following costs:  
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production.

-  Calculate the overhead cost per unit for Excellent Laptops using a plantwide rate based on direct labor costs.(Note: Round answer to two decimal places.)
A) $9.63 per laptop 
B) $22.45 per laptop 
C) $4.25 per laptop 
D) $7.22 per laptop 
E) $7.50 per laptop

Quizplus · Accepted Answer

Total overhead costs = (Cost of setting up equipment + Cost of machining) = ($3,000 + $15,000) = $18,000
Total direct labor cost = (Direct labor cost for Excellent Laptops + Direct labor cost for Outstanding Computers) = ($25,000 + $10,000) = $35,000
Overhead rate = Total overhead costs / Total direct labor costs
Overhead rate = $18,000 / $35,000 = $0.51 per direct labor dollar (or 51% of direct labor cost)
Overhead cost per unit for Excellent Laptops = ($0.51 × Direct labor cost for Excellent Laptops) / Expected production in units = ($0.51 × $25,000) / 3,000 laptops = $4.25 per laptop

Alpha Technology Produces Two Products: a High End Laptop Under