Question

The Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below.

Product	Number of Units	Labor Hours Per Unit	Machine Hours Per Unit
Blinks	1,052	5	8
Dinks	1,844	4	7

All of the machine hours take place in the Fabrication department, which has an estimated overhead of $113,700. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $95,800.

The Ramapo Company uses a single overhead rate to apply all overhead costs. What would the single plantwide rate be if it was based on machine hours instead of labor hours?

a.$22.60 per machine hour

b.$7.86 per machine hour

c.$12.28 per machine hour

d.$9.82 per machine hour

Answer 1

Solution:
	Answer is d.$9.82 per machine hour
Working Notes:
	single plantwide rate be if it was based on machine hours
	Single Plantwide Factory Overhead Rate
	=Total Budgeted Factory Overhead / Total Budgeted Plantwide Allocation Base
	=$209,500/ 21,324 machine hours
	=$9.82461076 machine hours
	=$9.82 per machine hours
Notes:	Total Budgeted Factory Overhead
	=(Assembly department OH + Fabrication department OH)
	=(113,700 + 95,800)
	=$209,500
	Budgeted Plantwide Allocation Base
	(machine hours)
	= Budgeted machine hours for both the product
	=Blinks + Dinks
	= (1,052 x 8   + 1,844 x 7)
	= (8,416   + 12,908)
	=21,324 machine hours
Please feel free to ask if anything about above solution in comment section of the question.