Single Plantwide Factory Overhead Rate The Total Factory Overhead For Bardot Marine Company Is Budgeted For The Year At $2,380,600. Bardot Marine Manufactures Two Types Of Boats: Speedboats And Bass Boats. The Speedboat And Bass Boat Each Require Six Direct Labor Hours For Manufacture. Each Product Is Budgeted For 11,500 Units Of Production For The Year. When required, roond all per unit answers to the nearest cent Determine the total number of budgeted direct labor hours for the year direct labor hours b. Determine the single plantwide factory overhead rate. per dih . Determine the factory overhead allocated per unit for each product using the single plantwide factory overhead rate Speedboat Bass bost per unit
The Correct Answer and Explanation is :
Solution:
Step 1: Calculate the total number of budgeted direct labor hours for the year.
Each unit of Speedboat requires 6 direct labor hours, and 11,500 units of Speedboats are budgeted:
[
\text{Speedboats Total Direct Labor Hours} = 6 \times 11,500 = 69,000 \, \text{hours}
]
Each unit of Bass Boat also requires 6 direct labor hours, and 11,500 units of Bass Boats are budgeted:
[
\text{Bass Boats Total Direct Labor Hours} = 6 \times 11,500 = 69,000 \, \text{hours}
]
The total direct labor hours for the factory:
[
\text{Total Direct Labor Hours} = 69,000 + 69,000 = 138,000 \, \text{hours}
]
Step 2: Determine the single plantwide factory overhead rate.
The total factory overhead is $2,380,600, and the total direct labor hours are 138,000:
[
\text{Overhead Rate} = \frac{\text{Total Overhead}}{\text{Total Direct Labor Hours}} = \frac{2,380,600}{138,000} \approx 17.25 \, \text{per direct labor hour}
]
Step 3: Calculate the factory overhead allocated per unit for each product.
Each unit of both Speedboats and Bass Boats requires 6 direct labor hours. Using the overhead rate:
[
\text{Overhead Allocated per Unit} = \text{Overhead Rate} \times \text{Direct Labor Hours per Unit}
]
[
\text{Overhead Allocated per Unit} = 17.25 \times 6 = 103.50 \, \text{per unit}
]
Thus:
- Speedboat Overhead per Unit: $103.50
- Bass Boat Overhead per Unit: $103.50
Explanation:
The single plantwide factory overhead rate allocates overhead costs to products based on a common measure—in this case, direct labor hours. The method assumes that overhead resources are consumed proportionally to the direct labor hours spent on production.
By calculating a single overhead rate (\$17.25 per hour), we allocate factory overhead to each product. Since both Speedboats and Bass Boats have identical labor hour requirements (6 hours/unit), their overhead costs per unit are the same. This method simplifies cost allocation but may overlook differences in overhead usage between products, potentially causing inaccuracies in more complex production environments.