Challenger Factory produces two similar products: regular widgets and deluxe widgets. The total factory overhead budget is $675,000 with 300,000 estimated direct labor hours. Deluxe widget production requires 3 direct labor hours for each unit, and regular widget production requires 2 direct labor hours for each unit. Using a single plantwide factory overhead rate with an allocation base of direct labor hours, the factory overhead that Challenger Factory will allocate to regular widget production if budgeted production of regular widgets for the period is 75,000 units and actual production of regular widgets for the period is 72,000 units would bea. $168,750 b. $324,000 c. $162,000 d. $337,500

The correct answer is B.

Explanation:

Giving the following information:

Total estimated overhead= $675,000

Total estimated direct labor hours= 300,000 hours

Regular widget production requires 2 direct labor hours for each unit.

The actual production of regular widgets for the period is 72,000 units.

First, we need to calculate the estimated overhead rate:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 675,000/300,000= $2.25 per direct labor hour

Now, we can allocate overhead to regular widgets:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Actual direct labor hours= 72,000 units*2hours= 144,000 hours

Allocated MOH= 2.25*144,000= $324,000

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