# (Solved): Seco, Inc., produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rat

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 \$1,872,000 Expected activity 52,000 Actual activity (direct labor hours): Deluxe dryer 12,000 Regular dryer 40,000 Units produced: Deluxe dryer 24,000 Regular dryer 200,000

Required:

1. Calculate the predetermined plantwide overhead rate, using direct labor hours.
\$ ______________per hour

Calculate the applied overhead for each product, using direct labor hours.

 Applied overhead Deluxe \$__________ Regular \$__________

2. Calculate the overhead cost per unit for each product. If required, round your answers to the nearest cent.

 Overhead Cost Deluxe_____________ \$ per unit Regular_____________ \$ per unit

3. What if the deluxe product used 24,000 hours (to produce 24,000 units) instead of 12,000 hours (total expected hours remain the same)? Calculate the effect on the profitability of this product line if all 24,000 units are sold.

Profits would (ncrease/ decrease) by \$____________

Solution:

Predetermined Plant-wide Overhead Rate

– Overhead Rate is the predetermined rate which is used to apply the manufacturing overhead to production department or products or job orders.

– Normally, it is calculated at the beginning of the period.

– It is calculated by dividing the estimated factory overhead cost by an allocation base (or suitable basis).

– Allocation bases may be direct labor hours, direct labor costs, machine hours etc.

Mathematically, it is calculated as follows:

Predetermined Factory Overhead Rate = Estimated Manufacturing Overhead Cost / Estimated Allocation Base

Plant-wide overhead rate means predetermined overhead rate of plant as a whole.

1)

Here, in the question allocation base is direct labor hours.

Predetermined Plant-wide Overhead Rate = Estimated Manufacturing Overhead Cost \$1,872,000 / Estimated Direct Labor Hours 52,000 DLHs

= \$36 per direct labor hour

Deluxe = Actual Direct Labor Hour x Overhead Rate = 12,000 DLHs x \$36 = \$432,000

Regular = Actual DLHs x Overhead Rate = 40,000 DLHs x \$36 = \$1,440,000

2) Overhead Cost per unit for each product

 Total Applied Overhead Total Units Produced Overhead Cost per unit Deluxe \$432,000 24,000 Units \$18 per Unit (432,000 / 24,000) Regular \$1,440,000 200,000 Units \$7.20 per unit (1,440,000 / 200,000)

3)

Direct Labor Hours used by Deluxe Product = 24,000 Hours

Earlier Labor Hours Used by Deluxe Product = 12,000 Hours

Difference in Labor Hours = 12,000 Hours (24,000 – 12,000)

Overhead Rate per DLH = \$36 per DLH

Since the Overhead Cost is increased the profitability of this product line would decrease by \$432,000(12,000 hours x \$36)

Order NOW for a 10% Discount
Pages (550 words)
Approximate price: -

Why Us?

Top Quality and Well-Researched Papers

All ourbpapers are written from scratch. In fact, Clients who ask for paraphrasing services are highly discouraged. We have writers ready to craft any paper from scratch and deliver quality ahead of time.

Professional and Experienced Academic Writers

Our writers keeps you posted on your papers progress - providing you with paper outline/draft. You are also at liberty to communicate directly with your writer.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time, in many cases quite ahead of time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

## Calculate the price of your order

Total price:
\$0.00

How it works?

Follow these simple steps to get your paper done

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

## Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.