Question

The Nite Lite Company manufactures small lamps and desk lamps. The following shows the activities per product:

Set-ups Inspections Assembly (DLH)
Small Lamps - 4,000 units 4,000 16,000 4,000
Desk Lamps - 8,000 units 16,000 8,000 24,000

Using the following information prepared by the Nite Lite Company, determine the total factory overhead rate to be charged to desk lamps.

Activity Pool Activity Base Budgeted Amount
Set-ups 20,000 $60,000
Inspections 24,000 $120,000
Assembly (DLH) 28,000 $420,000


a. $380,000
b. $184,000
c. $152,000
d. $448,000

Answer 1

Total allocated overhead= $448,000

Step-by-step explanation:

First, we need to calculate the predetermined overhead rate for each activity:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Set-ups= 60,000/20,000= $3 per setup

Inspections= 120,000/24,000= $5 per inspection

Assembly (DLH)= 420,000/28,000= $15 per direct albor hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Desk Lamps:

Set-ups= 3*16,000= $48,000

Inspections= 5*8,000= $40,000

Assembly (DLH)= 15*24,000= $360,000

Total overhead= $448,000