Question

Adirondack 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.
Overhead Total
Direct
Labor Hours DLH per Product
A B
Painting Dept. $241,700 10,500 8 11
Finishing Dept. 69,700 10,500 5 6
Totals $311,400 21,000 13 17

Using a single plantwide rate, the factory overhead allocated per unit of Product A in the Painting Department is
a.$14.83 per unit
b.$690.57 per unit
c.$118.64 per unit
d.$184.15 per unit

Answer 1

The factory overhead allocated per unit of Product A in the Painting Department is $ .

Given,

                             Overhead       Total direct       DLH per product

                                                    Labour Hours           A          B

Painting dept.       $241000        10500                       8          11

Finishing dept.      $69700         10500                       5           6

Totals                     $311400        21000                       13         17

Single overhead rate per hour = total overheads/ total labor hours

Now, substituting the values in the formula

Single overhead rate per hour = 311400/21000

                                                   = $14.83 per labor hour

Now, direct labor hours for product A for the Painting department  = 16 hours

Overhead rate per unit of product A in the painting department = 16 hours × $14.83 per hour

Overhead rate = $237.28 per unit

Thus, Adirondak Marketing Inc. would allocate $237.28 to the painting department for 1 unit of Product A.

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