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Question
Outer Limits, Inc. produces fencing units which require two processes, A and B, to complete. The best-selling type of fence is made of pvc. Information related to the 8,000 units of pvc fencing produced annually is shown below.
| Direct materials | $450,000 |
| Direct labor | |
| Department A (5,000 DLH x $23 per DLH) | $115,000 |
| Department B (4,000 DLH x $25 per DLH) | $100,000 |
| Machine hours | |
| Department A | 2,000 MH |
| Department B | 3,000 MH |
Outer Limits total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on machine hours in department A and direct labor hours in department B.
| Department A | Department B | |
| Direct labor hours | 9,000 DLH | 7,000 DLH |
| Machine hours | 6,500 MH | 13,000 MH |
| Manufacturing overhead costs | $54,600 | $67,060 |
Determine the total amount of overhead assigned to each unit of pvc fencing.
Answer
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