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 deluxe widget production if budgeted production for the period for deluxe widgets is 50,000 units and actual production of deluxe widgets for the period is 58,000 units would be
A)$391,500
B)$225,000
C)$261,000
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 deluxe widget production if budgeted production for the period for deluxe widgets is 50,000 units and actual production of deluxe widgets for the period is 58,000 units would be
A)$391,500
B)$225,000
C)$261,000
D)$337,500

Quizplus · Accepted Answer

The factory overhead rate is $675,000 / 300,000 direct labor hours = $2.25 per direct labor hour. The budgeted overhead for deluxe widgets is 50,000 units * 3 direct labor hours per unit * $2.25 per direct labor hour = $337,500. The actual overhead for deluxe widgets is 58,000 units * 3 direct labor hours per unit * $2.25 per direct labor hour = $391,500.

Challenger Factory Produces Two Similar Products: Regular Widgets and Deluxe