Red Raider Company uses a plantwide overhead rate with direct labor hours as the allocation base. Next year, 590,000 units are expected to be produced requiring 0.90 direct-labor hours each. How much overhead will be assigned to each unit produced given the following estimated amounts? Estimated: Department 1 Department 2 Manufacturing overhead costs $ 2,568,000 $ 957,000 Direct labor hours 187,000 DLH 129,000 DLH Machine hours 31,900 MH 9,900 MH

Allocated unitary overhead = $6.64

Explanation:

Giving the following information:

Plantwide overhead rate with direct labor hours as the allocation base.

Next year, 590,000 units are expected to be produced requiring 0.90 direct-labor hours each.

Estimated:

Department 1

Manufacturing overhead costs $ 2,568,000

Direct labor hours 187,000

Machine hours 31,900

Department 2

Manufacturing overhead costs $ 957,000

Direct labor hours 129,000

Machine hours 9,900

actual hours of allocation base = 590,000*0.90 = 531000 hours

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

Estimated manufacturing overhead rate D1 = 2568000/531000 = 4.84

Estimated manufacturing overhead rate D2 = 957000/531000 = 1.80

Allocated unitary overhead = 4.84 + 1.80 = $6.64