The total factory overhead for Martin Company is budgeted for the year at $375,000. Martin manufactures two garden products: a leaf blower and a garden wagon. These products each require 4 direct labor hours (dlh) to manufacture. Each product is budgeted for 2,500 units of production for the year. What would the single plantwide factory overhead rate be?

$18.75 per direct labor hour

Explanation:

the company's total estimated production is 2,500 leaf blowers and 2,500 garden wagons. The production of each product requires 4 direct labor hours, so if 5,000 units will be produced in total, then the company the require 5,000 units x 4 dlh per unit = 20,000 direct labor hours.

To determine the single plant wide factory overhead rate we divide total budgeted overhead rate by total direct labor hours = $375,000 / 20,000 hours = $18.75 per direct labor hour.

Factory overhead includes indirect costs that must be allocated to the manufactured products.

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