Question

1.

The Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below.

Product	Number of units	Labor hours per unit	Machine hours per unit
Blinks	1,000	4	5
Dinks	2,000	2	8

All of the machine hours take place in the Fabrication department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $72,000.

The Ramapo Company uses a single overhead rate to apply all overhead costs based on labor hours. What is the overhead cost per unit for Dinks?

a.$19.50

b.$59.92

c.$77.00

d.$39.00

2.

The Aleutian Company produces two products, Rings and Dings. They are manufactured in two departments—Fabrication and Assembly. Data for the products and departments are listed below.

Product	Number of Units	Labor Hours Per Unit	Machine Hours Per Unit
Rings	930	2	3
Dings	2,680	9	11

All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $82,400. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $73,400.

The Aleutian Company uses departmental overhead rates. The Fabrication Department uses machine hours for an allocation base, and the Assembly Department uses labor hours.

What is the overhead cost per unit for Rings?

a.$53.52

b.$3.92

c.$13.31

d.$43.16

Answer 1

Question-1
Computation of Overhead Cost per Unit
Total overheads ($84,000 + $72000)	$1,56,000.00
Total Labour Hours (1000X 4+2000X2)	8000
Overhead rate ( $156000/8000)   *	$19.50/Hour
Overhead cost per unit for Dinks ($19.50 *2)	$39 per Hour
*Overhead Rate = Total Overhead / Labor Hours
**Overhead cost per unit for Dinks = Overhead Rate * Labor Hours per unit
Hence Correct Answer is   $39

Question-2
Computation of Overhead Cost per Unit
Fabrication overheads	$82,400.00
Total Machine Hours in Fabrication Department (930*3+2680*11)	32270
Overhead rate ( $82400/32270)   *	$2.55
Assembly overheads	$73,400.00
Total Labour Hour in Asssembly Department (930*2+2680*9)	25980
Overhead rate ( $73400/25980)   *	$2.83
Overhead cost per unit for Ring	$13.31
( 3 Machine HourX $2.55)+ (2 Labour Hour X$2.83)
Hence Correct Answer is   $13.31

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