Question

Water Sports Company budgets overhead cost of $840,000 for the year. The company manufactures two types of boats: Pontoons and Speedboats. Budgeted direct labor hours per unit are 16 for the Pontoon model and 24 for the Speedboat model. The company budgets production of 200 units of the Pontoon model and 200 units of the Speedboat model for the year. The plantwide overhead rate using budgeted direct labor hours is:

a.$262.50 per DLH.
b.$175.00 per DLH.
c.$105.00 per DLH.
d.$525.00 per DLH.
e.$2,100.00 per DLH.

Answer 1

The plantwide overhead rate using budgeted direct labor hours can be calculated by dividing the total budgeted overhead cost by the total budgeted direct labor hours.

Step-by-step explanation:

The plantwide overhead rate using budgeted direct labor hours can be calculated by dividing the total budgeted overhead cost by the total budgeted direct labor hours. In this case, the total budgeted overhead cost is $840,000 and the total budgeted direct labor hours is 16 hours for the Pontoon model and 24 hours for the Speedboat model, multiplied by the number of units budgeted for each model (200 for each model).

The plantwide overhead rate using budgeted direct labor hours equals $840,000 / ((16 * 200) + (24 * 200)) = $840,000 / 8,000 = $105.00 per direct labor hour. Therefore, the correct answer is (c) $105.00 per DLH.