Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the com
ID: 2385235 • Letter: B
Question
Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.
Direct labor Product
Overhead hours (dlh) A B
Painting dept 248,000 10,000dlh 16dlh 4dlh
finishing dept. 72,000 10,000 4 16
Total 320,000 20,000dlh 20 dlh 20dlh
Determine the overhead from both production departments allocated to each unit of Product A if the company uses a multiple department rate system.
a. $425.60 per unit
b. $320.00 per unit
c. $214.40 per unit
d. $396.80 per unit
Explanation / Answer
Painting dept Dlh rate = $248,000/10000 = $24.80 Finishing dept dlh Rate = $72000/10000 = $7.20 So OH rate for Prod A = 16 dlh of Painting*Painting OH Rate + 4 Hrs of finishing*Finishing OH rate = 16*$24.80 + 4*$7.20 = $425.60 .............Ans (a)