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.

Overhead Direct
Labor Hours (dlh) Product A B Painting Dept. $267,900 11,200 dlh 13 dlh 6 dlh Finishing Dept. 76,300 6,500 2 16     Totals $344,200 17,700 dlh 15 dlh 22 dlh

Explanation / Answer

Overhead rate/direct labor hour for Painting Dept=(267900/11200)=$23.9196(Approx)

Hence overhead for each unit of Product B

(23.9196*6)

=$143.52/unit(Approx)

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