Sheridan Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20000 units annually. Planter is a low-volume item totaling only 6000 units per year. Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32000 (20000 + 12000). Estimated annual manufacturing overhead costs are $1120000. Sheridan uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of


Select answer from the options below

$35.00.

$43.08.


$70.00.


need more information to compute.

Let's compute the overhead assigned to each unit of Planter using the traditional costing system. In a traditional costing system, overhead is assigned based on direct labor hours (DLH).

### Steps:
1. **Total Direct Labor Hours (DLH):**
   - Flower: $ 20,000 \text{ units} \times 1 \text{ hour/unit} = 20,000 \text{ hours} $
   - Planter: $ 6,000 \text{ units} \times 2 \text{ hours/unit} = 12,000 \text{ hours} $
   - Total DLH: $ 20,000 + 12,000 = 32,000 \text{ hours} $

2. **Overhead Rate:**
   - Total annual overhead costs = $1,120,000
   - Overhead rate per DLH = $ \frac{\$1,120,000}{32,000 \text{ DLH}} = 35 \text{ dollars per DLH} $

3. **Overhead Assigned to Planter:**
   - Each unit of Planter requires 2 DLH.
   - Overhead per unit of Planter = $ 35 \times 2 = 70 \text{ dollars per unit} $

Thus, **each unit of Planter would be assigned overhead of $70.00**.

The correct answer is:
- **$70.00**

Would you like further details or have any questions on this? 

Here are 5 related questions to deepen understanding:
1. How would the overhead assignment change if the direct labor hours for Planter were reduced?
2. What is the effect of using direct labor hours as the basis for overhead allocation in this case?
3. How would overhead allocation differ under activity-based costing (ABC) compared to the traditional method?
4. What are the benefits of using a traditional costing system over ABC for a company like Sheridan?
5. How does the overhead allocation affect the pricing strategy for the Flower and Planter products?

**Tip**: When overhead costs vary significantly by product complexity, consider switching from traditional to activity-based costing for more accuracy.

Sheridan Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20000 units annually. Planter is a low-volume item totaling only 6000 units per year. Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32000 (20000 + 12000). Estimated annual manufacturing overhead costs are $1120000. Sheridan uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of $35.00, $43.08, $70.00, or need more information to compute.

Learn how to compute overhead allocation for Sheridan Company using the traditional costing method. The problem involves calculating direct labor hours, overhead rates, and assigning overhead to high-volume and low-volume products. Suitable for college-level business and accounting students.

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