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Homework answers / question archive / Blue Ridge Marketing Inc
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.
OverheadDirect
Labor Hours (dlh)Product A B Painting Dept.$428,583 10,300dlh 16dlh3dlhFinishing Dept.68,229 5,700 6 20 Totals$496,812 16,000dlh 22dlh23dlh
Determine the overhead from both production departments allocated to each unit of Product B if Blue Ridge Marketing Inc. uses a multiple department rate system.
a.$41.61 per unit
b.$737.58 per unit
c.$364.23 per unit
d.$11.97 per unit
Computation of overhead from both production departments allocated to each unit of Product B if Blue Ridge Marketing Inc. uses a multiple department rate system:
Overhead rate per hour for the painting department = Total overhead of the painting department ÷ Total estimated direct labor hours
=$428,583/10,300
= $41.61
Overhead rate per hour of the finishing department = Total overhead of the finishing department ÷ Total estimated direct labor hours
=$68,229/5,700
= $11.97
Overhead from both production departments allocated to each unit of Product B
= $41.61*3 dlh + $11.97*20 dlh
= $124.83+$239.40
= $364.23 per unit
