Hartley Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20000 units annually. Planter is a low-volume item totaling only 6000 units per year. Flower requires 1 hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32000 (20000 + 12000). Expected annual manufacturing overhead costs are $740000. Hartley uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of ... ?

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Business

Goon

23 May, 03:55

Hartley Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20000 units annually. Planter is a low-volume item totaling only 6000 units per year. Flower requires 1 hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32000 (20000 + 12000). Expected annual manufacturing overhead costs are $740000. Hartley uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of ... ?

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Demarion Dorsey · Answer 1

Planter = $46.25 unit

Explanation:

Giving the following information:

The expected annual manufacturing overhead costs are $740000. The total annual direct labor hours are 32000. Flower requires 1 hour of direct labor for completion, while each unit of Planter requires 2 hours.

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base = 740000/32000 = $23.125 per hour

Now we can allocate MOH Flower and Planter:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Planter = 23.125 * 12000 = $277,500/6000 units = $46.25