Calculator Blue Ridge Marketing Inc. manufactures two products, A and B. Present

Question

Calculator 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. Direct Product OverheadLabor Hours (dlh) Painting Dept. $464,820 Finishing Dept.82,302 $547,122 12,200 dlh 12 dlh 7 dlh 18 25 dlh 8,600 Totals 20,800 dlh 17 dlh Determine the overhead from both production departments allocated to each unit of Product A if Blue Ridge Marketing Inc. uses a multiple department rate system. a. $38.10 per unit b, $505.05 per unit c. $438.96 per unit d. $9.57 per unit

Explanation / Answer

Painting Dept overhead rate = 464820/12200= $38.1 Finishing Dept overhead rate = 82302/8600= $9.57 Overhead per unit of product A=(12*38.1)+(5*9.57)= $505.05 per unit Option B is correct

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