A company allocates $7.50 overhead to each unit produced. The company uses a plantwide overhead rate with direct labor hours as the allocation base. Given the amounts below, how many direct labor hours does the company expect in department 2?
$$\begin{array} { l c c }
\text { Estimated: } & \text { Department 1 } & \text { Department 2 } \
\text { Manufacturing overhead costs } & \$ 74,358 & \$ 49,572 \
\text { Direct labor hours } & 6,610 \mathrm { DLH } & ? \mathrm { DLH } \
\text { Machine hours } & 700 \mathrm { MH } & 800 \mathrm { MH }
\end{array}$$

Question

A company allocates $7.50 overhead to each unit produced. The company uses a plantwide overhead rate with direct labor hours as the allocation base. Given the amounts below, how many direct labor hours does the company expect in department 2?
$$\begin{array} { l c c } 
\text { Estimated: } & \text { Department 1 } & \text { Department 2 } \
\text { Manufacturing overhead costs } & \$ 74,358 & \$ 49,572 \
\text { Direct labor hours } & 6,610 \mathrm { DLH } & ? \mathrm { DLH } \
\text { Machine hours } & 700 \mathrm { MH } & 800 \mathrm { MH }
\end{array}$$

Quizplus · Accepted Answer

The plantwide overhead rate is $7.50 per direct labor hour. Department 2 has $49,572 of overhead allocated to it. So, Department 2 must have $49,572/$7.50 = 6,610 direct labor hours.

A Company Allocates $7 A) 9,914 DLH