Figure 4-10 The Manoli Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
Departmental Data: (expected and actual)
Refer to Figure 4-10. What is the unit product cost for rug cleaners if a plantwide rate is used based on direct labor hours?
A) $11.00
B) $ 4.00
C) $ 5.40
D) $ 4.12

Question

Figure 4-10 The Manoli Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
 Departmental Data: (expected and actual)
 Refer to Figure 4-10. What is the unit product cost for rug cleaners if a plantwide rate is used based on direct labor hours?
A) $11.00 
B) $ 4.00 
C) $ 5.40 
D) $ 4.12

Quizplus · Accepted Answer

To calculate the unit product cost for rug cleaners using a plantwide rate based on direct labor hours, we need to first calculate the plantwide rate by dividing the total expected overhead costs by the total expected direct labor hours.

Total expected overhead costs = $810,000 
Total expected direct labor hours = 150,000

Plantwide rate = Total expected overhead costs / Total expected direct labor hours 
Plantwide rate = $810,000 / 150,000 = $5.40 per direct labor hour

Next, we need to allocate overhead costs to each product based on the actual direct labor hours used for each product.

For rug cleaners: 
Direct materials = $4.50 
Direct labor = $4.00 
Actual direct labor hours = 2,000

Overhead cost = Actual direct labor hours x Plantwide rate 
Overhead cost = 2,000 x $5.40 = $10,800

Total product cost = Direct materials + Direct labor + Overhead cost 
Total product cost = $4.50 + $4.00 + $10,800 = $10.50

Therefore, the unit product cost for rug cleaners is $10.50.

Figure 4-10 the Manoli Company Has Collected the Following Data