Question

The Aleutian Company produces two products, Rings and Dings. They are manufactured in two departments—Fabrication and Assembly. Data for the products and departments are listed below. Product Number of Units Labor Hours Per Unit Machine Hours Per Unit Rings 1,080 2 5 Dings 1,890 5 10 All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $86,500. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $72,000. The Aleutian Company uses departmental overhead rates. The Fabrication Department uses machine hours for an allocation base, and the Assembly Department uses labor hours. What is the overhead cost per unit for Rings?

a. $53.37 b. $7.62 c. $66.60 d. $30.20

Answer 1

- Fabrication department Overheads:

Total Overheads = $86,500

Total Machine hours required for RIngs = 1080 * 5 = 5400

Total Machine hours required for DIngs = 1890 * 10 = 18900

Total Machine hours required = 24,300

Overhead per hour to be charged = $86,500 / $24,300 = $3.56

A. Overhead for a single Ring = 5*$3.56 = $17.8

- Assembly department Overheads:

Total Overheads = $72,000

Total labor hours required for Rings = 1080 * 2 = 2160

Total labor hours required for DIngs = 1890 * 5 = 9450

Total Machine hours required = 11,610

Overhead per hour to be charged = $72,000 / $11,610 = $6.202

B. Overhead for a single Ring = 2*$6.202 = $12.404

Total Overhead for a ring (A+B) = $17.8 + $12.40 = $30.2

Option D is correct.