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 desk lamp will require 1 hours of finishing and 2 hours of production, how much factory overhead will be allocated to each unit of desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours?
A) $11.10
B) $4.91
C) $5.00
D) $7.20

Question

Quizplus · Accepted Answer

The correct answer is A.The factory overhead rate for the finishing department is $550,000 / 500,000 direct labor hours = $1.10 per direct labor hour. The factory overhead rate for the production department is $400,000 / 80,000 direct labor hours = $5.00 per direct labor hour. A desk lamp requires 1 hour of finishing and 2 hours of production, so the total factory overhead allocated to each unit of desk lamps is $1.10 * 1 + $5.00 * 2 = $11.10.

The Kaumajet Factory Produces Two Products - Table Lamps and Desk