Question

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 Labor Hours (dlh) Product A B Painting Dept. $272,300 8,900 dlh 14 dlh 2 dlh Finishing Dept. 74,100 8,300 5 18 Totals $346,400 17,200 dlh 19 dlh 20 dlh The 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.$30.60 per unit b.$61.20 per unit c.$17.86 per unit d.$40.28 per unit

Answer 1

Multiple production rate uses different cost drivers to allocate costs of different departments to its products.

we will find rate per direct labor hour of painting department

Total cost =$272,300

Direct labors in painting = 8,900

	Overhead	/	Direct labor hour	=	Overhead rate per hour	X	Product B hours	Overhead per unit of B
Painting department	$272,300	/	8,900	=	$30.60 per hour[$272,300/8,900]		2	=$61.20[$30.60*2]

Thus, The factory overhead allocated per unit of Product B in the Painting Department if Blue Ridge Marketing Inc. uses the multiple production department is $61.20

Answer b)

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