Question

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. ProductNumber of UnitsLabor Hours Per UnitMachine Hours Per Unit Blinks91047 Dinks2,01875 All of the machine hours take place in the Fabrication department, which has an estimated overhead of $95,700. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $84,800. 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

Answer 1

Answer: $10.16

Explanation:

The company uses a single overhead rate to apply all overhead costs based on labor hours.

The solution therefore would be to divide the total amount of overhead by the total amount of direct Labor costs.

Estimated Overhead Total

= Assembly Overhead + Fabrication Overhead

= 84,800 + 95,700

= $180,500

Total Direct Labor

= Blinks No of units * Blinks labor rate + Dinks No of units * Dinks labor rate

= ( 910 * 4) + (2,018 * 7)

= 3,640 + 14,126

= 17,766 labor hours

Single Overhead Rate on basis of Direct Labor,

= 180,500/17,766

= 10.1598

= $10.16

Overheqd Cost is $10.16