Question

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	Direct 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.

Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs based on direct labor hours. The factory overhead allocated per unit of Dinks is

a.$39.00

b.$59.92

c.$19.50

d.$77.00

Answer 1

Factory overhead allocated per unit of Dinks = Plantwide factory overhead rate * Direct labor hours per unit

Plantwide factory overhead rate = Total Budgeted factory overhead / Total Budgeted plantwide allocation base

Total Budgeted factory overhead = ($84,000 + $72,000)

= $156,000

Total Budgeted plantwide allocation base = (1,000 * 4) + (2,000 * 2)

= 8,000 direct labor hours

Plantwide factory overhead rate = $156,000 / 8,000 direct labor hours

= $19.50 per direct labor hours

Factory overhead allocated per unit of Dinks = $19.50 * 2

= $39.00