The Ramapo Company produces two products, Blinks and Dinks. They are manufacture

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.

Products                           # of units               labor hrs per unit             Mach hrs. per unit

Blinks                                    1000                    4                                        5

Dinks                                      2000                   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.


The Ramapo Company uses a single overhead rate to apply all overhead costs. What would the single plantwide rate be if it was based on machine hours instead of labor hours?
a. $9.00 per MH

b. $4.00 per MH

c. $7.43 per MH

d. $19.50 per MH

Explanation / Answer

Total MH Hrs = MH pu*Blink + MHpu*DLink = 5*1000+8*2000 = 21,000 Total OHs = $84000+$72000 = $156,000 So OH rate = Total OH/Tota MHs = $156,000/21,000 = $7.43 per MH

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