Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the com
ID: 2526435 • 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.
Determine the overhead from both production departments allocated to each unit of Product A if Blue Ridge Marketing Inc. uses a multiple department rate system.
a.$605.10 per unit
b.$11.46 per unit
c.$402.48 per unit
d.$36.52 per unit
Overhead Direct
Labor Hours (dlh) Product A B Painting Dept. $467,456 12,800 dlh 15 dlh 6 dlh Finishing Dept. 63,030 5,500 5 16 Totals $530,486 18,300 dlh 20 dlh 22 dlh
Explanation / Answer
Painting department overhead rate = 467456/12800 = 36.52 per hour
Finishing department overhead rate = 63030/5500 = 11.46 per hour
Product A each unit cost = (36.52*15+11.46*5) = 605.10
so answer is a) $605.10 per unit