Automation Production Systems and ComputerIntergrated Manufa

Automation, Production Systems, and Computer-Intergrated Manufacturing 4th edition (book)

Chapter 3 Problem 3.22

Cost have been compiled for a certain manufacturing company for the most recent year. The summary is shown in teh table below.   The Company operates two different manufacturing plants, plus a corporate headquarters. Determine (A) the factory overhead rate for each plant and (B) the corporate overhead rate. The firm will use these rates in teh following year.

Expence Category

Plant 1, Direct labor $1,000,000 Materials $3,500,000 Factory expences $1,300,000

Plant 2 Direct Labor $$1,750,000 Materials $4,000,000 Factory expences $2,300,000

Corporate Headquarters, Corporate expense $5,000,000

Solution

From the above given table

Expence Category       Plant 1,                   Plant 2                             Corporate expenses

Direct labor                  $1,000,000             $1,750,000

Materials                     $3,500,000              $4,000,000

Factory expences        $1,300,000             $2,300,000

Corporate Headquarters, Corporate expense                                              $5,000,000

from the table the factory overhead rate for each plant1 is given =Factory expenses/Director Labour =(1,300,000/1,000,000)  =1.30 =130%

the factory overhead rate for each plant2 is given =Factory expenses/Director Labour =(2,300,000/1,750,000)  =1.3143 =131.43%

b) The corporate overhead rate is given by =Corporate Headquarters, Corporate expense/(Plant1labour +plant2 labour) =5,000,000/(1,000,000+1,750,000)) =1.8182 =181.82%