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What is the average direct labor cost rate
Course:- Financial Management
Reference No.:- EM13471

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Question 1:

Assume a manufacturer incurs 2,000,000 hours of direct productive labor in a year at a total direct labor cost of \$50,000,000. The total manufacturing indirect expense for the same period is \$67,500,000.

1. What is the average direct labor cost rate?

2. If the overhead were distributed on the basis of direct labor hours, what would the rate be per hour.

3. if the overhead were distributed on the basis of direct labor dollars, what would the percentage rate be. Using the same factors above, assume that we have two projects each requiring 100,000 direct labor hours.

Project A, because of work requirements and personnel assigned, direct labor costs of \$2,040,000 or \$20.40 per hour, were experienced. Project B, requires a direct labor cost of \$2,800,000, or \$28.00 per hour.

Question 2:

Calculate the amount of overhead that would be allocated to the two projects on a labor hour and labor dollar basis for Project A &B 2) A cost estimate for a contract, included 3,000 hours of direct labor, the company uses a plant-wide overhead rate. Assume that the projected overhead cost for the coming period are \$3,800,000 and projected direct labor amounts to 215,000 hours.

1. What is the overhead rate

2. using the above rate what is the dollar amount of the overhead applicable to the contract Upon review of the company's operations you find that it has two department, assembly and machine shop.

The overhead accounts are Assembly Department- projected overhead costs \$1,800,000 and projected direct labor hours is 165,000 Machine Department - projected overhead costs \$2,000,000 and projected direct labor hours is 50,000

1. Calculate a department overhead rate per labor hour for Assembly and Machine Departments.

2. if a department rate were used, what amount of overhead would be allocated to the proposed contract? What is the plant wide rate?

3.What rate should the buyer use- plant-wide rate or department rate?

Question 3:

Kmart forecasts it overhead rat for 20xx at \$30.00 per hour. this is based on the assumption that the a fixed portion of indirect manufacturing cost would amount to \$12,000,000 and that the variable indirect manufacturing expenses would amount to 6000,000 hours. Consider the effect of the following assumptions.

1. At the end of 20xx actual company experience shows indirect manufacturing cost of \$15,000,000 and actual direct labor hours of 600,000 Was the overhead under absorbed or over absorbed? Did it benefit the company or its customer and by how much\$____

2. At the end of 20xx actual overhead cost amounted to \$21,500,000 and the company expended 400,000 direct labor hours. Was the overhead under absorbed or over absorbed? Did it benefit the company or its customer and by how much\$____

3. At the end of 20xx actual overhead cost amounted to \$17,000,000 and the company expended 450,000 direct labor hours Was the overhead underabsorded or over absorbed? Did it benefit the company or its customer and by how much\$____

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