[The following information applies to the questions displayed below.] Malone Company sells two products Big X and Little X. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $510,000. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $20 per hour and the company expects to manufacture 15,000 units of Big X and 18,000 units of Little X next year. DirectMaterialper UnitDirectLabor Dollarsper UnitBig X$5 $18 Little X$3 $12?Malone's plantwide overhead rate will be $20.99 per direct labor hour next year.
Answer the following statement true (T) or false (F)
True
Direct labor hours per unit of Big X = $18/$20 = 0.9 DLH
Direct labor hours per unit of Little X = $12/$20 = 0.6 DLH
Estimated direct labor hours = (0.9 × 15,000) + (0.6 × 18,000) = 24,300 direct labor hours
Plantwide overhead rate = $510,000/24,300 DLH = $20.99 per DLH
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