Cornerstone Exercise 4.1 (Algorithmic)
Applied Overhead and Unit Overhead Cost: Plantwide RatesSeco, Inc., produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rate based on direct labor hours to assign its overhead costs. The company has the following estimated and actual data for the coming year:
Estimated overhead $1,320,000
Expected activity 44,000
Actual activity (direct labor hours):
Deluxe dryer 9,000
Regular dryer 35,000
:Deluxe dryer 18,000
Regular dryer 175,000
1. Calculate the predetermined plantwide overhead rate, using direct labor hours.
$ per hour
Calculate the applied overhead for each product, using direct labor hours.
Applied overheadDeluxe$ Regular$
2. Calculate the overhead cost per unit for each product. If required, round your answers to the nearest cent.
Overhead CostDeluxe$ per unitRegular$ per unit
3. What if the deluxe product used 18,000 hours (to produce 18,000 units) instead of 9,000 hours (total expected hours remain the same)? Calculate the effect on the profitability of this product line if all 18,000 units are sold.
Profits would – Select your answer -increasedecrease
Item 6 by $