Homework SourseXie Company identified the following activities costs and ac
Xie Company identified the following activities, costs, and activity drivers for 2017. The company manufactures two types of go-karts: Deluxe and Basic.
Required:
1. Compute a single plantwide overhead rate, assuming that the company assigns overhead based on 125,000 budgeted direct labor hours.
2. In January 2017, the Deluxe model required 2,500 direct labor hours and the basic model required 6,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate.
| Activity | Expected Costs | Expected Activity | ||||
| Handling materials | $ | 625,000 | 100,000 | parts | ||
| Inspecting product | 900,000 | 1,500 | batches | |||
| Processing purchase orders | 105,000 | 700 | orders | |||
| Paying suppliers | 175,000 | 500 | invoices | |||
| Insuring the factory | 300,000 | 40,000 | square feet | |||
| Designing packaging | 75,000 | 2 | models | |||
Solution
1. single plantwide overhead rate = Total Expected Costs / Total budgeted direct labor hours
= $ 2,180,000 / 125,000 Hours
= $ 17.44 per direct labor hour.
Hence the correct answer is $ 17.44
2. Overhead costs assigned to Deluxe model = single plantwide overhead rate * Total direct labor hours for the Deluxe model
= $ 17.44 * 2,500 direct labor hours
= $ 43,600
Overhead costs assigned to Basic model = single plantwide overhead rate * Total direct labor hours for the Basic model
= $ 17.44 * 6,000 direct labor hours
= $ 104,640
Hence the correct answer is $43,600 and $ 104,600
