Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 40,000 units next year and Product L is expected to sell 8,000 units. A unit of either product requires 0.4 direct labor-hours. The company's total manufacturing overhead for the year is expected to be $1,632,000. Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product

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Business

Demetrius Warren

9 July, 08:22

Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 40,000 units next year and Product L is expected to sell 8,000 units. A unit of either product requires 0.4 direct labor-hours. The company's total manufacturing overhead for the year is expected to be $1,632,000. Required: 1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product

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Adan Mcgee · Answer 1

Product L = $34

Product H = $34

Explanation:

Giving the following information:

Product H is expected to sell 40,000 units next year and Product L is expected to sell 8,000 units.

A unit of either product requires 0.4 direct labor-hours.

Estimated overhead = $1,632,000. R

First, we need to calculate the estimated overhead rate:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 1,632,000 / (48,000*0.4)

Estimated manufacturing overhead rate = $85 per direct labor hour

Now, we can allocate overhead:

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

Product L = 85*0.4 = $34

Product H = 85*0.4 = $34