Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the com

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.

Determine the overhead in the Painting Department for each unit of Product B if Blue Ridge Marketing Inc. uses a multiple department rate system.

a.$33.39 per unit

b.$23.26 per unit

c.$46.52 per unit

d.$17.23 per unit

Overhead Direct
Labor Hours (dlh) Product A B Painting Dept. $260,500 11,200 dlh 14 dlh 2 dlh Finishing Dept. 78,400 9,100 5 19     Totals $338,900 20,300 dlh 19 dlh 21 dlh

Explanation / Answer

Painting department rate = 260500/11200 = 23.26 per unit

Overhead in the painting department for each unit of product B = (23.26*2) = 46.52 per unit

so answer is c) $46.52 per unit

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