Question

Lake Erie Company uses a plantwide overhead rate with machine hours as the allocation base. Next year, 610,000 units are expected to be produced taking 0.70 machine hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?

Estimated: - Department 1 - Department 2Manufacturing overhead costs - $3,141,500 - $1,571,000Direct labor hours - 167,000 DLH - 267,000 DLHMachine hours - 267,000 MH - 192,000 MHa. $10.86 per unitb. $8.73 per unitc. $4.22 per unitd. $11.77 per unite. $10 per unit

Answer 1

Step-by-step explanation:

Manufacturing overhead for department 1 = $3,141,500

Direct labor hours for department 1 = 167,000

Direct machine hours for department 1 = 267,000

Manufacturing overhead for department 2 = $1,571,000

Direct labor hours for department 2 = 267,000

Direct machine hours for department 2 = 192,000

Total manufacturing overhead = $3,141,500 + $1,571,000 = $4,712,500

Total direct labor hours = 167,000 + 267,000 = 434,000

Total machine hours = 267,000 + 192,000 = 459,000

Pre- determined overhead rate per MH

=
`(total\ manufacturing\ overhead)/(total\ machine\ hours)`

=
`(4,712,500)/(459,000)`

= $10.27 per MH

Overhead rate per unit

= Pre-determined overhead rate per MH x Machine Hours required per unit

= $10.27 per MH x 0.70 MHs per unit

= $7.186 per unit