New Dawn Cleaning Supplies makes a variety of cleaning products, including powder cleansers, window-washing fluid, and dishwashing soap. The company currently has $10,000,000 in overhead, which it charges out on its 100,000 direct labor hours. Sam Houston, manufacturing supervisor, has asked Joey Burns to look at changing over to ABC for the various batches of product made. He believes he will get much greater accuracy if it switches methods, giving him better control over the plant. Direct labor is paid $15 per hour on average.

Information about the different departments and information on the latest batches of products made are in the tables below.

REQUIRED:

a. Calculate the current overhead rate using direct labor hours as your driver. Be sure to include all forms of overhead, no matter where the money is spent.

b. How much does it cost per container of each type of product using direct labor dollars as the overhead rate?

c. Now develop six rates for your plant. Molding will be charged on bottles made, Blending on batches made, containers filled in Filling, Set-Up on set-up hours, Material Handling on moves made, and General Overhead on direct labor hours.

d. How much does it cost now to make a batch of each of the types of cleaning supplies?

e. Which method of calculating overhead is better? Why?

Transcribed Image Text:

New Dawn Cleaning Supplies Molding Blending Riling Set-Up Material Handling General Overhead Overhead $1,500,000 $3,400,000 $2,600,000 $250,000 $600,000 $1,650,000 Direct labor hours 30,000 20,000 50,000 NA NA NA Bottles made 40,000,000 NA NA NA NA NA Batches blended NA 400 NA NA NA NA Containers filled NA NA 75,000,000 NA NA NA Set-up hours NA NA NA 2,500 NA NA Moves made NA NA NA NA 20,000 NA