Question

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Adirondak 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. DLH per Product Total Direct Labor Hours Overhead $247,100 Painting Dept. Finishing Dept. 84,700 10,600 10,900 21,500 Totals $331,800 Calculate the plantwide factory overhead rate for Adirondack Marketing Inc. a. $7.77 per dih b. $15.43 per dih c. $23.31 per dih d. $2.50 per dit

Answer 1

Plantwide rate = Estimated overheads/Total Direct labor hours

= 331800/21500

= $15.43 per DLH

i.e. b

Overhead rate per unit = rate per hour*Labor hours used

Rate = 245300/10,200 = 24.05 per hour

Assigned= 24.05*4

= $96.20 per unit

i.e. a

Single rate = 316900/22700 = $13.96 per hour

Rate per unit = 13.96*17 = $237.32

Overhead rate = Overheads/Total driver

= 326700/(450+205+700)

= $241.11

i.e. c