Data for this question is available in "Lumina" worksheet of the accompanying Excel spreadsheet provided above.

Lumina Kitchenware Ltd. produces two types of blenders: QuickMix (basic model) and ProBlend (premium, high-performance model). The company currently uses a plant-wide overhead allocation method based on labour hours, but management is considering Activity-Based Costing (ABC) to improve cost accuracy.

The production process includes three main activities:

Plastic moulding
Assembly of components
Quality testing & packaging

The production team has provided the following estimates for the upcoming period:

QuickMix ProBlend Total
Budgeted Volume (units) 6,000 4,000 10,000
Machine hours 3,000 7,000 10,000
Direct labour hours 8,000 12,000 20,000
Number of inspections 60 140 200

The management accounting team has identified the following budgeted overhead costs and activity drivers:

Activity Budgeted Overhead Cost ($) Activity Driver
Plastic moulding 500,000 Machine hours
Assembly of components 900,000 Direct labour hours
Quality testing & packaging 200,000 Number of inspections

Required:

Using the plant-wide overhead allocation method, calculate the total manufacturing overhead per unit for ProBlend. Round your answer to 2 decimal places where applicable.

Question

Data for this question is available in "Lumina" worksheet of the accompanying Excel spreadsheet provided above.

Lumina Kitchenware Ltd. produces two types of blenders: QuickMix (basic model) and ProBlend (premium, high-performance model). The company currently uses a plant-wide overhead allocation method based on labour hours, but management is considering Activity-Based Costing (ABC) to improve cost accuracy.

The production process includes three main activities:

Plastic moulding 
Assembly of components
Quality testing & packaging

The production team has provided the following estimates for the upcoming period:

QuickMix	ProBlend	Total
Budgeted Volume (units)	6,000	4,000	10,000
Machine hours	3,000	7,000	10,000
Direct labour hours	8,000	12,000	20,000
Number of inspections	60	140	200

The management accounting team has identified the following budgeted overhead costs and activity drivers:

Activity	Budgeted Overhead Cost ($)	Activity Driver
Plastic moulding	500,000	Machine hours
Assembly of components	900,000	Direct labour hours
Quality testing & packaging	200,000	Number of inspections

Required:

Using the plant-wide overhead allocation method, calculate the total manufacturing overhead per unit for ProBlend. Round your answer to 2 decimal places where applicable.

BlackTom AI · Accepted Answer

Plant-wide overhead uses direct labour hours as the single allocation base, so compute the single overhead rate per direct labour hour and apply it to ProBlend’s total direct labour hours, then divide by ProBlend units.

1) Relevant concepts
- Plant-wide (single-rate) overhead allocation: total budgeted overhead is divided by total budgeted activity (here direct labour hours) to get an overhead rate per hour.  
- Overhead assigned to a product = overhead rate × product’s activity usage (direct labour hours).  
- Overhead per unit = overhead assigned to product ÷ budgeted units of that product.

2) Step-by-step calculations
- Sum total budgeted overhead (all activities):
  Plastic moulding = $500,000
  Assembly = $900,000
  Quality testing & packaging = $200,000
  Total overhead = 500,000 + 900,000 + 200,000 = $1,600,000

- Total direct labour hours (plant-wide driver) = 20,000 hours

- Plant-wide overhead rate per direct labour hour:
  Overhead rate = Total overhead / Total direct labour hours
  = $1,600,000 / 20,000 hours
  = $80.00 per direct labour hour

- Overhead allocated to ProBlend:
  ProBlend direct labour hours = 12,000 hours
  Allocated overhead = $80.00/hour × 12,000 hours = $960,000

- Overhead per ProBlend unit:
  Budgeted ProBlend units = 4,000
  Overhead per unit = $960,000 / 4,000 = $240.00

3) Why this is correct
Because the problem explicitly states management currently uses a plant-wide overhead allocation based on labour hours. Therefore the single rate computed using total overhead divided by total direct labour hours is the correct basis. Applying that rate to ProBlend’s labour hours yields the $960,000 assigned overhead and dividing by 4,000 units gives $240.00 per unit.

4) Why other allocations would be incorrect here
Using activity-based drivers (machine hours or inspections) would produce different per-unit amounts (for example, using machine hours: $1,600,000/10,000 = $160 per machine hour, ×7,000 = $1,120,000 → $280/unit). Those would be correct under ABC but not under the plant-wide labour-hour method required by this question.

Conclusion: Total manufacturing overhead per unit for ProBlend = $240.00, which matches the provided answer.

类似问题

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