Challenger Factory produces two similar products: regular widgets and deluxe widgets. The total factory overhead budget is $675,000 with 300,000 estimated direct labor hours. Deluxe widget production requires 3 direct labor hours for each unit, and regular widget production requires 2 direct labor hours for each unit.
-Using a single plantwide factory overhead rate with an allocation base of direct labor hours, the factory overhead that Challenger Factory will allocate to regular widget production if budgeted production of regular widgets for the period is 75,000 units and actual production of regular widgets for the period is 72,000 units would be
A)$168,750
B)$324,000
C)$162,000
D)$337,500

Question

Challenger Factory produces two similar products: regular widgets and deluxe widgets. The total factory overhead budget is $675,000 with 300,000 estimated direct labor hours. Deluxe widget production requires 3 direct labor hours for each unit, and regular widget production requires 2 direct labor hours for each unit.​
-Using a single plantwide factory overhead rate with an allocation base of direct labor hours, the factory overhead that Challenger Factory will allocate to regular widget production if budgeted production of regular widgets for the period is 75,000 units and actual production of regular widgets for the period is 72,000 units would be
A)$168,750
B)$324,000
C)$162,000
D)$337,500

Quizplus · Accepted Answer

To calculate the factory overhead allocated to regular widget production, first, find the plantwide factory overhead rate by dividing the total factory overhead budget by the total estimated direct labor hours: $675,000 / 300,000 hours = $2.25 per direct labor hour. Regular widget production requires 2 direct labor hours per unit, so the overhead cost per regular widget is 2 hours * $2.25 = $4.50. For the budgeted production of 75,000 units, the overhead would be 75,000 units * $4.50 = $337,500. However, the actual production is 72,000 units, so the allocated overhead is 72,000 units * $4.50 = $324,000.

Challenger Factory Produces Two Similar Products: Regular Widgets and Deluxe