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.Overhead Direct Product
Labor Hours (dlh) A BPainting Dept. $248,000 10,000 16dlh 4dlhFinishing Dept. 72,000 10,000 4 16 Totals $320,000 20,000 20 dlh 20dlhThe factory overhead allocated per unit of Product B in the Painting Department if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is
a.$99.20 per unit
b.$64.00 per unit
c.$49.60 per unit
d.$28.80 per unit

Respuesta :

The factory overhead allocated per unit of Product B in the Painting Department if the multiple production department factory overhead rate method is used is $64.00 per unit. Thus, the correct answer is option B.

What is a factory overhead?

The entire expense of running all production facilities for a manufacturing company that cannot be precisely linked to a specific product is known as factory overhead. Indirect labor and indirect costs are typically affected.

The factory overhead allocated per unit of Product B in the Painting Department is calculated as:-

                           Overhead    Labor Hours

                              A              B            A       B

Painting Dept. $248,000  $10,000      16      4

Finishing Dept.  $72,000   $10,000       4     16

Total                   $320,000  $20,000    20    20

Calculation for plantwide overhead rate:

Predetermined manufacturing overhead rate= Total estimated overhead costs for the period/ Total amount of allocation base

= 320,000 / 20,000

Predetermined manufacturing overhead rate= $16 per direct labor hour

Allocated factory overhead = Estimated manufacturing overhead rate* Actual amount of allocation base

= 16*4

= $64.00 per unit

Therefore, the factory overhead allocated per unit of Product B in the Painting Department is $64.00 per unit

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