The Aleutian Company produces two products—Rings and Dings; they are manufacture

Question

The Aleutian Company produces two products—Rings and Dings; they are manufactured in two departments—Fabrication and Assembly. Data for the products and departments are as follows. Rings: 1,000 units; 4 labor hours per unit; and 6 machine hours per unit. Dings: 2,000 units; 3 labor hours per unit; and 9 machine hours per unit. All of the machine hours take place in the Fabrication Department, which has an estimated total overhead of $90,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $105,000. The Aleutian Company uses departmental overhead rates. The Fabrication Department uses machine hours for an allocation base, and the Assembly Department uses labor hours. What is the Assembly Department’s overhead rate per labor hour? a $10.50 b $19.50 c $3.75 d $4.38

Explanation / Answer

For the Assembly Department in the Aleutian Company Rings 1000 units X 4 labour hours per unit = 4,000 hours Dings 2000 units X 3 labour hours per unit = 6,000 hours Total time spent for production in the assembly department = 10,000 hours At the estimated total overhead of $ 105,000, the overhead rate per labour hour is $ 105,000 / 10,000 = $ 10.50 per labour hour

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