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.

	Overhead		Direct Labor Hours (dlh)			Product
						A		B
Painting Dept.	$249,800		9,100	dlh		12	dlh	3	dlh
Finishing Dept.	77,900		8,000			2		15
Totals	$327,700		17,100	dlh		14	dlh	18	dlh

The factory overhead allocated per unit of Product B in the Painting Department if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is

a.$57.49 per unit

b.$29.21 per unit

c.$82.35 per unit

d.$27.45 per unit

Answer 1

Answer

--Painting department rate = $ 249800 / 9100 DLH = $ 27.45

--No. of hrs per unit of B = 3 DLH

--Overhead allocated to 'B' = 3 DLH x $ 27.45 = $ 82.35

--Correct Answer = Option 'C' $ 82.35 per unit.