Rain Maker Company uses a plantwide overhead rate with direct-labor hours as the allocation base. Next year, 350,000 units are expected to be produced taking .80 direct-labor hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?
$\begin{array}{lcc}
\text { Estimated: } & \text { Department } 1 & \text { Department 2 } \
\text { Manufacturing overhead costs } & \$ 2,730,000 & \$ 910,000 \
\text { Direct labor hours } & 168,000 \mathrm{DLH} & 112,000 \mathrm{DLH} \
\text { Machine hours } & 30,000 \mathrm{MH} & 7,000 \mathrm{MH}
\end{array}$

Question

Quizplus · Accepted Answer

The total estimated overhead is $2,730,000 + $910,000 = $3,640,000. Total direct labor hours are 168,000 + 112,000 = 280,000 DLH. The overhead rate per DLH is $3,640,000 / 280,000 DLH = $13.00 per DLH. Each unit takes 0.80 DLH, so overhead per unit is $13.00 * 0.80 = $10.40.

Rain Maker Company Uses a Plantwide Overhead Rate with Direct-Labor