Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours.
-If a desk lamp requires 1 hour of fabrication and 2 hours of assembly, the amount of factory overhead that Kaumajet Factory will allocate to each unit of desk lamp using the multiple production department factory overhead rate method with an allocation base of direct labor hours is
A)$11.10
B)$4.91
C)$5.00
D)$7.20

Question

Quizplus · Accepted Answer

The factory overhead rate for each department is calculated by dividing the total overhead by the total direct labor hours. For the Fabrication Department, it's $550,000 / 500,000 hours = $1.10 per hour. For the Assembly Department, it's $400,000 / 80,000 hours = $5.00 per hour. A desk lamp requires 1 hour of fabrication and 2 hours of assembly, so the overhead cost per desk lamp is (1 hour * $1.10) + (2 hours * $5.00) = $1.10 + $10.00 = $11.10.

Kaumajet Factory Produces Two Products: Table Lamps and Desk Lamps