Red Raider Company uses a plantwide overhead rate with direct labor hours as the allocation base.Next year,400,000 units are expected to be produced requiring 0.9 direct-labor hours each.How much overhead will be assigned to each unit produced given the following estimated amounts?
A)$19.00 per unit
B)$17.10 per unit
C)$139.00 per unit
D)$125.10 per unit
E)None of the choices

Question

Red Raider Company uses a plantwide overhead rate with direct labor hours as the allocation base.Next year,400,000 units are expected to be produced requiring 0.9 direct-labor hours each.How much overhead will be assigned to each unit produced given the following estimated amounts? 
A)$19.00 per unit 
B)$17.10 per unit 
C)$139.00 per unit 
D)$125.10 per unit 
E)None of the choices

Quizplus · Accepted Answer

First, we need to calculate the plantwide overhead rate using the following formula:
Plantwide overhead rate = Total estimated overhead / Total estimated direct labor hours
Plantwide overhead rate = $1,748,000 / (400,000 x 0.9) = $4.87 per direct labor hour

To assign overhead to each unit produced, we multiply the plantwide overhead rate by the direct labor hours required per unit:
Overhead per unit = Plantwide overhead rate x Direct labor hours per unit
Overhead per unit = $4.87 x 0.9 = $4.38

Therefore, overhead assigned to each unit produced is $4.38. To get the total cost per unit, we need to add the direct materials and direct labor costs. If those estimated amounts were not provided, we cannot calculate the total cost per unit.

However, we see that option B is the closest to our calculated overhead per unit. Option B is $17.10 per unit, which makes sense because it includes the direct materials and direct labor costs in addition to overhead.

Red Raider Company Uses a Plantwide Overhead Rate with Direct