Outer Limits, Inc Outer Limits' Total Expected Overhead Costs and Related Overhead Data

Essay

Outer Limits, Inc. produces fencing units which require two processes, A and B, to complete. The best-selling type of fence is made of PVC. Information related to the 8,000 units of pvc fencing produced annually is shown below.

$$\begin{array} { | c | c | } \hline \text { Direct materials } & \$ 450,000 \\\hline \text { Direct labor } & \\\hline \text { Department A (5,000 DLH x } \$ 23 \text { per DLH) } & \$ 115,000 \\\hline \text { Department B (4,000 DLH x } \$ 25 \text { per DLH) } & \$ 100,000 \\\hline \text { Machine hours } & \\\hline \text { Department A } & 2,000 \mathrm { MH } \\\hline \text { Department B } & 3,000 \mathrm { MH } \\\hline\end{array}$$

Outer Limits' total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on machine hours in department A and direct labor hours in department B.

$$\begin{array} { | l | l | l | } \hline & \text { Department A } & \text { Department B } \\\hline \text { Direct labor hours } & 9,000 \mathrm { DLH } & 7,000 \mathrm { DLH } \\\hline \text { Machine hours } & 6,500 \mathrm { MH } & 13,000 \mathrm { MH } \\\hline \text { Manufacturing overhead costs } & \$ 54,600 & \$ 67,060 \\\hline\end{array}$$
Determine the total amount of overhead assigned to each unit of PVC fencing.