Single plantwide factory overhead rate The total factory overhead for Diva-natio

Question

Single plantwide factory overhead rate The total factory overhead for Diva-nation Inc. is budgeted for the year at $98,940. Diva-nation manufactures two types of men's pants: jeans and khakis. The jeans and khakis each require 0.05 direct labor hour (dlh) for manufacture. Each product is budgeted for 19,400 units of production for the year. When required, round all per- unit answers to the nearest cent. A. Determine the total number of budgeted direct labor hours for the year. direct labor hours B. Determine the single plantwide factory overhead rate. When required, round all per-unit answers to the nearest cent. $0.10 per dlh C. Determine the factory overhead allocated per unit for each product using the single plantwide factory overhead rate. When required, round all per-unit answers to the nearest cent. Jeans S Khakis $ per unit per unit

Explanation / Answer

A.

CALCULATION OF TOTAL NUMBER OF BUDGETED DIRECT LABOUR HOURS FOR THE YEAR

TWO TYPES OF PRODUCTS ARE MANUFACTURED WHICH ARE JEANS & KHAKIS IN MENS PANTS

EACH PRODUCT (JEANS & KHAKIS ) REQUIRES 0.05 DIRECT LABOUR HOURS FOR MANUFACTURE.SO WE HAVE,

= 19400 UNITS * 0.05DLH + 19400 UNITS * 0.05DLH

= 970DLH + 970DLH

= 1940DLH

B.

CALCULATION OF SINGLE PLANTWIDE FACTORY OVERHEAD RATE

FORMULA FOR OVERHEAD RATE (ON THE BASIS OF DIRECT LABOUR HOURS) = TOTAL BUDGETED FACTORY OVERHEAD/TOTAL BUDGETED DIRECT LABOUR HOURS

= $98940 / 1940DLH

= $51 PER UNIT OF PRODUCT (FOR JEANS AND KHAKIS)

NOTE : WE HAVE TAKEN 1940DLH THE REASON BEHIND IT IS SINGLE PLANTWIDE FACTORY OVERHEAD RATE IS TO BE CALCULATED SO BOTH PRODUCT LABOUR HOURS ARE TO BE CONSIDERED. THE VALUE OF TOTAL BUDGETED DIRECT LABOUR HOURS IS DERIVED FROM POINT A. CALCULATION.

C.

CALCULATION OF AMOUNT OF FACTORY OVERHEAD ALLOCATED PER UNIT FOR EACH PRODUCT (JEANS & KHAKIS)

APPLYING INFORMATION FROM A. & B. POINTS

OVERHEAD ALLOCATION FORMULA = UNITS TO BE MANUFACTURED * DIRECT LABOUR HOURS PER UNIT * OVERHEAD ALLOCATED PER UNIT OF PRODUCT

OVERHEAD ALLOCATED PER UNIT = OVERHEADS ALLOCATED / TOTAL UNITS

FOR JEANS = 19400 UNITS * 0.05DLH * $51

= $49470

PER UNITS = $49470 / 19400 UNITS

= $2.55 PER UNIT OF JEANS

FOR KHAKIS = 19400 UNITS * 0.05DLH * $51

= $49470

PER UNITS = $49470 / 19400 UNITS

= $2.55 PER UNIT OF KHAKI

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