In: Accounting
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 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
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.