Manteca Inc. produces two types of speakers: Deluxe and regular. Manteca 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 $750000
Expected Activity 25000
Actual Activity (direct labor hours):
Deluxe speaker 5000
Regular speaker 20000
Units produced:
Deluxe speaker 10000
Regular speaker 100000
1. Calculate the predetermined plantwide overhead rate and the applied overhead for each product using labor hours.
2. Calculate the overhead cost per unit for each product.
3. What if the deluxe product used 10000 hours (to produce 10000 units) instead of 5000 hours (total expected hours remian the same)? Calculate the effect
on the profitability of this product line if all 10000 units are sold and then discuss the implications of this outcome.