The following data relates to Lead Company's estimated amounts for next year.
$$\begin{array} { l c c }
\text { Estimated: } & \text { Department 1 } & \text { Departnent } 2 \
\text { Manufacturing overhead costs } & \$ 1,200,000 & \$ 3,400,000 \
\text { Direct labor hours } & 560,000 \mathrm { DLH } & 780,000 \mathrm { DLH } \
\text { Machine hours } & 91,000 \mathrm { MH } & 23,000 \mathrm { MH }
\end{array}$$
What is the company's plantwide overhead rate if direct labor hours are the allocation base?
(Round to two decimal places)
A) $3.43 per direct labor hour.
B) $2.14 per direct labor hour.
C) $4.36 per direct labor hour.
D) $.29 per direct labor hour.
E) $.47 per direct labor hour.

Question

The following data relates to Lead Company's estimated amounts for next year.
$$\begin{array} { l c c } 
\text { Estimated: } & \text { Department 1 } & \text { Departnent } 2 \
\text { Manufacturing overhead costs } & \$ 1,200,000 & \$ 3,400,000 \
\text { Direct labor hours } & 560,000 \mathrm { DLH } & 780,000 \mathrm { DLH } \
\text { Machine hours } & 91,000 \mathrm { MH } & 23,000 \mathrm { MH }
\end{array}$$
What is the company's plantwide overhead rate if direct labor hours are the allocation base?
(Round to two decimal places)
A) $3.43 per direct labor hour.
B) $2.14 per direct labor hour.
C) $4.36 per direct labor hour.
D) $.29 per direct labor hour.
E) $.47 per direct labor hour.

Quizplus · Accepted Answer

The plantwide overhead rate is calculated by dividing the total estimated manufacturing overhead costs by the total estimated direct labor hours. In this case, the total estimated manufacturing overhead costs are $1,200,000 + $3,400,000 = $4,600,000, and the total estimated direct labor hours are 560,000 DLH + 780,000 DLH = 1,340,000 DLH. Therefore, the plantwide overhead rate is $4,600,000 / 1,340,000 DLH = $3.43 per direct labor hour.

The Following Data Relates to Lead Company's Estimated Amounts for Next