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Smythe Co. makes furniture. The following data are taken from its production plans for the year. Direct labor costs $ 5,590,000 Hazardous waste disposal costs

Smythe Co. makes furniture. The following data are taken from its production plans for the year.

Direct labor costs $ 5,590,000
Hazardous waste disposal costs 625,000

Chairs Tables
Expected production 201,000 units 18,000 units
Direct labor hours required 258,000 DLH 15,800 DLH
Hazardous waste disposed 500 pounds 500 pounds

Required:

1. Determine the hazardous waste disposal cost per unit for chairs and for tables if costs are assigned using a single plantwide overhead rate based on direct labor hours.
per direct labor hour
Product Activity Driver OH $ per direct labor hour Total Overhead Cost Units Produced OH Cost per unit
Chairs
Tables
2. Determine hazardous waste disposal costs per unit for chairs and for tables if costs are assigned based on the number of pounds disposed of.
Product Activity Driver OH $ per pound Total Overhead Cost Units Produced OH Cost per unit
Chairs
Tables

3. Which method is better for assigning costs to each product?

  • Assignment based on the number of pounds

  • Assignment based on direct labor hours

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