The Aleutian Company produces two products, Rings and Dings. They are manufactur
ID: 2549259 • Letter: T
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 listed below.
All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $85,700. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $68,900.
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 overhead rate per labor hour?
Product Number of
Units Labor Hours
Per Unit Machine Hours
Per Unit Rings 1,010 4 5 Dings 2,480 8 10
Explanation / Answer
The correct answer is c. $ 2.89
Note :
1. Total Labour Hours = Labour Hours Per Unit * Number of Units for Rings +Labour Hours Per Unit * Number of Units for Dings
= ( 1,010 * 4 ) + ( 2,480 * 8)
= 23,880 Hours
2. The Assembly Department overhead rate per labor hour = Total Estimated Overhead for Assembly / Total Hours
= $ 68,900 / 23,880 Hours
= $ 2.89
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