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. - $250,000 - 10,000 - 16, 4Finishing Dept. - 75,000 - 12,000 - 4, 16Totals - $325,000 - 22,000 - 20, 20Calculate the overhead rate per unit for Product A in the painting department of Adirondack Marketing Inc.a. $325.00 per unitb. $147.70 per unitc. $236.32 per unitd. $161.00 per unit

Answer 1

Answer:

c.236.32 per unit

Explanation:

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

= 325000/22000 = 14.77 per labor hour

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

Overhead rate per unit of product A in the painting department = 16 hours × $14.77 per hour

Overhead rate = $236.32 per unit

Thus, Adirondak Marketing Inc. would allocate $236.32 to painting department for 1 unit of Product A.