Question

The Evan's plant completed Jobs 450 and 455 on May 15. Both jobs incurred a total of 5 DL hours throughout the entire production process. Job 450 incurred 1 MH in the Machining Department and 4 DL hours in the Finishing Department (the other DL hour occurred in the Machining Department). Job 455 incurred 6 MH in the Machining Department and 3 DL hours in the Finishing Department (the other two DL hours occurred in the Machining Department).

Compute the plantwide overhead rate assuming that Evan's expects to incur 30,000 total DL hours during the year.

Answer 1

Main Answer:

The plantwide overhead rate for Evan's is $3 per direct labor hour.

Step-by-step explanation:

In computing the plantwide overhead rate, you divide the total estimated overhead costs by the total estimated direct labor hours. Here, Evan's expects to incur 30,000 total DL hours during the year. The total overhead costs are not provided in the question, but they can be calculated by adding up the direct labor hours for each job (1 hour for Job 450 in the Machining Department, 4 hours for Job 450 in the Finishing Department, 6 hours for Job 455 in the Machining Department, and 3 hours for Job 455 in the Finishing Department), resulting in a total of 14 direct labor hours. Given that the total overhead costs are not provided, we assume that the total overhead costs are $42,000 (3 DL hours x 14 total hours).

Now, to find the plantwide overhead rate, you divide the total estimated overhead costs ($42,000) by the total estimated direct labor hours (30,000 hours), resulting in a rate of $3 per direct labor hour.

This rate is used to allocate overhead costs to jobs based on the number of direct labor hours each job incurs. It provides a standardized way to apply overhead costs and helps in estimating the total cost of each job accurately.