Multiple Production Department Factory Overhead Rates The to

Multiple Production Department Factory Overhead Rates

The total factory overhead for Bardot Marine Company is budgeted for the year at $499,500, divided into two departments: Fabrication, $364,500, and Assembly, $135,000. Bardot Marine manufactures two types of boats: speedboats and bass boats. The speedboats require two direct labor hours in Fabrication and three direct labor hours in Assembly. The bass boats require one direct labor hour in Fabrication and one direct labor hour in Assembly. Each product is budgeted for 4,500 units of production for the year.

When required, round all per unit answers to the nearest cent.

a. Determine the total number of budgeted direct labor hours for the year in each department.

b. Determine the departmental factory overhead rates for both departments.

c. Determine the factory overhead allocated per unit for each product using the department factory overhead allocation rates.

Solution

Total number of budgeted direct labor hours for any year in any department

= Number of labor hours required per speedboat x Number of speedboats produced in a year + Number of labor hours required per bassboat x Number of bassboats produced in a year

Therefore,

Number of budgeted labor hours for Fabrication department

= 2 x 4500 + 1 x 4500

= 9000 + 4500

= 13500

Number of budgeted labor hours for Assembly department

= 3 x 4500 + 1 x 4500

= 13500 + 4500

= 18000

Fabrication

13500 direct labor hours

Assembly

18000 direct labor hours

Factory overhead rates for fabrication department

= Factory overhead rate for fabrication department / Direct labor hours for fabrication department

= $364500 / 13500 Dlh

= $27 per dlh

Factory overhead rates for assembly department

= Factory overhead rate for assembly department / Direct labor hours for assembly department

= $135000 / 18000 dlh

= $7.5 / dlh

Fabrication

$27 per dlh

Assembly

$7.5 per dlh

Factory overhead allocated for fabrication department per unit

= $364500/ 4500

= $81/ unit

Factory overhead allocated for Assembly department per unit

= $135000/ 4500

= $30/ unit

Speed boat

$81/ unit

Bass boat

$30/ unit