Question

Daffodil Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20,000 units annually. Planter is a low-volume item totaling only 6,000 units per year. Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual manufacturing overhead costs are $800,000. Daffodil uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of

Answer 1

Flower: $500,000

Planter: $300,000

Step-by-step explanation:

`(Cost\: Of \:Manufacturing \:Overhead)/(Cost \:Driver)= Overhead \:Rate`

We distribute the expected cost over the cost driver:

Expected manufacturing overhead: 800,000

Flowe 20,000 1 hour

Planter 6,000 2 hour

Expected direct labor (20,000 + 12,000) 32,000

800,000 / 32,000 = 25

then we aply the rate to the labor hours of each product

Flower: 20,000 x 25 = 500,000

Planter: 12,000 x 25 = 300,000