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.	$241,900		11,500	dlh		2	dlh	12	dlh
Finishing Dept.	72,100		11,300			5		7
Totals	$314,000		22,800	dlh		7	dlh	19	dlh

Using a single plantwide rate, determine the overhead rate per unit for Blue Ridge Marketing Inc.'s Product B.

$42.07

$96.39

$261.63

$13.77

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	957	2	4
Dinks	1,986	3	6

2)All of the machine hours take place in the Fabrication department, which has an estimated overhead of $108,200. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $79,800.

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.$27.46 per machine hour

b.$9.55 per machine hour

c.$14.93 per machine hour

d.$11.94 per machine hour

Answer 1

1) Overhead rate = Estimated overhead/estimated labor hour = 314000/22800 = 13.77 per labor hour

Overhead applied to product B = 13.77*19 = 261.63

So answer is c) $261.63

2) Total machine hour = (957*4+1986*6) = 15744 Machine hour

Overhead rate = (108200+79800)/15744 = 11.94

So answer is d) $11.94 per machine hour