Question - Seco, 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 $2,244,000
Expected activity 51,000
Actual activity (direct labor hours):
Deluxe dryer 11,000
Regular dryer 40,000
Units produced:
Deluxe dryer 22,000
Regular dryer 200,000
Required:
1. Calculate the predetermined plantwide overhead rate, using direct labor hours.
Calculate the applied overhead for each product, using direct labor hours.
2. Calculate the overhead cost per unit for each product. If required, round your answers to the nearest cent.
3. What if the deluxe product used 22,000 hours (to produce 22,000 units) instead of 11,000 hours (total expected hours remain the same)? Calculate the effect on the profitability of this product line if all 22,000 units are sold.