The Kaumajet Factory produces two products - table lamps and desk lamps. It has two separate departments - finishing and production. The overhead budget for the finishing department is $550,000, using 500,000 direct labor hours. The overhead budget for the production department is $400,000 using 80,000 direct labor hours. If the budget estimates that a table lamp will require 2 hours of finishing and 1 hours of production, how much factory overhead will be allocated to each unit of table lamp using the multiple production department factory overhead rate method with an allocation base of direct labor hours?
A) $6.33
B) $4.91
C) $5.00
D) $7.20

Question

Quizplus · Accepted Answer

The overhead rate for the finishing department is $550,000 / 500,000 hours = $1.10 per hour. The overhead rate for the production department is $400,000 / 80,000 hours = $5.00 per hour. A table lamp requires 2 hours in finishing and 1 hour in production, so the overhead allocated is (2 hours * $1.10) + (1 hour * $5.00) = $2.20 + $5.00 = $7.20.

The Kaumajet Factory Produces Two Products - Table Lamps and Desk