Question

1)

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 Product Direct Labor Hours (dlh) 11,600 dlh Overhead $348,580 40,964 $389,544 Painting Dept 13 dh 3 dlh Finishing Dept 4,900 16 Totals 16,500 dlh 16 dlh 19 dlh 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 Oa. $415.73 per unit Ob. $30.05 per unit Oc. $223.91 per unit Od. $8.36 per unit

2)

Answer 1

Answers

• Question 1

--Working

Working		Painting	Finishing
A	Overhead	$348,580	$40,964
B	DLHs	11600	4900
C = A/B	Overhead rate per DLHs	$30.05	$8.36
D	DLHs used by 'Product B'	3	16
E = CxD	Overhead allocated	$90.15	$133.76

--Correct Answer = Option ‘c’ $ 223.91 per unit [90.15 + 133.76]

• Question 2

--Correct Answer = Option ‘a’ $ 291,600

A	Estimated overhead	$574,000.00
B	Estimated total DLHs	477,000
C = A/B	Overhead rate per DLHs	$1.20
D	Actual DLHs by small lamp production	243,000
E = C x D	Overhead allocated	$291,600.00