Question

In: Accounting

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses...

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. 

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Determine the overhead in the Finishing Department for each unit of Product A if Blue Ridge Marketing Inc, uses a multiple department rate system 

$64.00 per unit 

$28.80 per unit 

$49.60 per unit 

$99.20 per unit

Solutions

Expert Solution

Finishing department overhead = $72,000

Finishing department direct labor hours = 10,000

Finishing department overhead rate = Finishing department overhead/Finishing department direct labor hours

= 72,000/10,000

= $7.2 per direct labor hour

Finishing department overhead rate for each unit of product A = Finishing department overhead rate x Direct labor hours used in finishing department

= 7.2 x 4

= $28.80 per unit

Second option is correct option.



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