Challenger Factory produces two similar products - regular widgets and deluxe widgets. The total plant overhead budget is $675,000 with 300,000 estimated direct labor hours. It is further estimated that deluxe widget production will need 3 direct labor hours for each unit and regular widget production will require 2 direct labor hours for each unit. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will be allocated to the deluxe widget production if the budgeted production for the period is 50,000 units and actual production for the period is 58,000 units?
A) $391,500
B) $225,000
C) $261,000
D) $337,500

Question

Quizplus · Accepted Answer

The correct answer is A.The plantwide factory overhead rate is $675,000 / 300,000 direct labor hours = $2.25 per direct labor hour.The deluxe widget production will need 3 direct labor hours for each unit, so the total direct labor hours for deluxe widget production is 58,000 units * 3 direct labor hours per unit = 174,000 direct labor hours.The factory overhead allocated to the deluxe widget production is 174,000 direct labor hours * $2.25 per direct labor hour = $391,500.

Challenger Factory Produces Two Similar Products - Regular Widgets and Deluxe