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 $____________
