Question

Crinkle Cut Clothes Company manufactures two products CC1 and CC2. Current direct material and direct labor costs are detailed below. Next year the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $338,250. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $28 per hour and the company expects to manufacture 22,000 units of CC1 and 91,000 units of CC2 next year. Direct Material per Unit Direct Labor Dollars per Unit CC1 $ 37.10 $ 22.40 CC2 $ 25.20 $ 15.40 Compute the plantwide overhead rate for next year.

Answer 1

Answer:

Overhead rate per hour = $5 per hour

Explanation:

Provided labor hour rate = $28 per hour

Also cost of direct labor for both the products

CC1 = $22.40

CC2 = $15.40

Total labor hour for each product = Cost per unit/Rate per hour

CC1 = $22.40/$28 = 0.8 X 60 minutes = 48 minutes

CC2 = $15.40/$28 = 0.55 X 60 minutes = 33 minutes

Provide total units

CC1 = 22,000 units, therefore total time = 22,000 X 48 minutes = 1,056,000 minutes = 17,600 hours (1,056,000/60)

CC2 = 91,000 units, therefore total time = 91,000 X 33 minutes = 3,003,000 minutes = 50,050 hours

Total hours = 17,600 + 50,050 hours = 67,650 hours

Therefore Overhead rate per hour = $338,250/67,650 = $5 per hour

On this rate per hour for labor the the overheads will be charged.

Overhead rate per hour = $5 per hour