Seco, Inc., produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rat

Seco, Inc., produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rate based on direct labor hours to assign its overhead costs. The company has the following estimated and actual data for the coming year:

Estimated overhead $1,872,000
Expected activity 52,000
Actual activity (direct labor hours):
Deluxe dryer 12,000
  Regular dryer 40,000
Units produced:
Deluxe dryer 24,000
  Regular dryer 200,000

Required:

1. Calculate the predetermined plantwide overhead rate, using direct labor hours.
$ ______________per hour

Calculate the applied overhead for each product, using direct labor hours.

Applied overhead
Deluxe $__________
Regular $__________

2. Calculate the overhead cost per unit for each product. If required, round your answers to the nearest cent.

Overhead Cost
Deluxe_____________ $ per unit
Regular_____________ $ per unit

3. What if the deluxe product used 24,000 hours (to produce 24,000 units) instead of 12,000 hours (total expected hours remain the same)? Calculate the effect on the profitability of this product line if all 24,000 units are sold.

Profits would (ncrease/ decrease) by $____________

Expert Answer

 

Solution:

Predetermined Plant-wide Overhead Rate

– Overhead Rate is the predetermined rate which is used to apply the manufacturing overhead to production department or products or job orders.

– Normally, it is calculated at the beginning of the period.

– It is calculated by dividing the estimated factory overhead cost by an allocation base (or suitable basis).

– Allocation bases may be direct labor hours, direct labor costs, machine hours etc.

Mathematically, it is calculated as follows:

Predetermined Factory Overhead Rate = Estimated Manufacturing Overhead Cost / Estimated Allocation Base

Plant-wide overhead rate means predetermined overhead rate of plant as a whole.

1)

Here, in the question allocation base is direct labor hours.

Predetermined Plant-wide Overhead Rate = Estimated Manufacturing Overhead Cost $1,872,000 / Estimated Direct Labor Hours 52,000 DLHs

= $36 per direct labor hour

Applied Overhead

Deluxe = Actual Direct Labor Hour x Overhead Rate = 12,000 DLHs x $36 = $432,000

Regular = Actual DLHs x Overhead Rate = 40,000 DLHs x $36 = $1,440,000

2) Overhead Cost per unit for each product

Total Applied Overhead Total Units Produced Overhead Cost per unit
Deluxe $432,000 24,000 Units $18 per Unit

(432,000 / 24,000)

Regular $1,440,000 200,000 Units $7.20 per unit

(1,440,000 / 200,000)

3)

Direct Labor Hours used by Deluxe Product = 24,000 Hours

Earlier Labor Hours Used by Deluxe Product = 12,000 Hours

Difference in Labor Hours = 12,000 Hours (24,000 – 12,000)

Overhead Rate per DLH = $36 per DLH

Since the Overhead Cost is increased the profitability of this product line would decrease by $432,000(12,000 hours x $36)

Buy Essay
Calculate your paper price
Pages (550 words)
Approximate price: -

Help Me Write My Essay - Reasons:

Best Online Essay Writing Service

We strive to give our customers the best online essay writing experience. We Make sure essays are submitted on time and all the instructions are followed.

Our Writers are Experienced and Professional

Our essay writing service is founded on professional writers who are on stand by to help you any time.

Free Revision Fo all Essays

Sometimes you may require our writers to add on a point to make your essay as customised as possible, we will give you unlimited times to do this. And we will do it for free.

Timely Essay(s)

We understand the frustrations that comes with late essays and our writers are extra careful to not violate this term. Our support team is always engauging our writers to help you have your essay ahead of time.

Customised Essays &100% Confidential

Our Online writing Service has zero torelance for plagiarised papers. We have plagiarism checking tool that generate plagiarism reports just to make sure you are satisfied.

24/7 Customer Support

Our agents are ready to help you around the clock. Please feel free to reach out and enquire about anything.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

HOW OUR ONLINE ESSAY WRITING SERVICE WORKS

Let us write that nagging essay.

STEP 1

Submit Your Essay/Homework Instructions

By clicking on the "PLACE ORDER" button, tell us your requires. Be precise for an accurate customised essay. You may also upload any reading materials where applicable.

STEP 2

Pick A & Writer

Our ordering form will provide you with a list of writers and their feedbacks. At step 2, its time select a writer. Our online agents are on stand by to help you just in case.

STEP 3

Editing (OUR PART)

At this stage, our editor will go through your essay and make sure your writer did meet all the instructions.

STEP 4

Receive your Paper

After Editing, your paper will be sent to you via email.

× How can I help you?