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.$33.32 per unit

b.$86.64 per unit

c.$64.10 per unit

d.$21.66 per unit

Overhead Direct
Labor Hours (dlh) Product A B Painting Dept. $251,300 11,600 dlh 15 dlh 4 dlh Finishing Dept. 70,800 8,500 4 19     Totals $322,100 20,100 dlh 19 dlh 23 dlh

Explanation / Answer

Answer b. $86.64 Overhead Rate per Hour - Painting Department = $251,300 (Total Overhead) / 11,600 dlh Overhead Rate per Hour - Painting Department = $21.66 per dlh (Approx.) Overhead rate per unit for the Painting Department - Product B = $21.66 X 4 dlh Overhead rate per unit for the Painting Department - Product B = $86.64 (Approx.)

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