Wever Ridge Marketing Inc. manufactures multiple products, but two specifically,
ID: 2460993 • Letter: W
Question
Wever Ridge Marketing Inc. manufactures multiple products, but two specifically, 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.
Estimated Direct Labor Hours (dlh) Per Dept
Product Usage of DLH
Departments
Overhead
Product A
Product B
Painting Dept.
$248,000
10,000 dlh
16 dlh
4 dlh
Finishing Dept.
72,000
10,000
4
16
Totals
$320,000
20,000 dlh
20 dlh
20 dlh
Determine the overhead rate in the Painting Department.
$12.40 per dlh
$24.80 per dlh
$7.20 per dlh
$16.00 per dlh
Estimated Direct Labor Hours (dlh) Per Dept
Product Usage of DLH
Explanation / Answer
Overhead rate = Total estimated overheads / Total estimated direct labor hours
Estimated overheads of Painting department = $248,000
Estimated direct labor hours of painting department = 10,000 dlh
Overhead rate in the painting department = $248,000/10,000 dlh = $24.80 per dlh
Hence answer is B. $24.80 per dlh
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