Longfellow Marketing Inc. manufactures two products, A and B. Presently, the com

Question

Longfellow Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plant-wide factory overhead rate for allocating overhead. From the following information, using a single plant-wide rate, determine the overhead rate per unit for Product A:

Overhead for Painting Dept: $248,000

Overhead for Finishing Dept: $72,000

Total Overhead for both Dept: $320,000

Direct labor Hours (dlh) for Painting Dept: 10,000 dlh

Direct labor Hours (dlh) for Finishing Dept: 10,000 dlh

Total labor hours for both depts: 20,000 dlh

Product A: Spent 16 dlh in Painting dept and 4 dlh in the finishing dept equaling a total of 20 dlh

Product B: Spent 4 dlh in Painting dept and 16 dlh in the finishing dept equaling a total of 20 dlh

Question is: Determine rate per unit for Product A.

Explanation / Answer

As factory uses single OH rate, DL Overhead rate for both Dept = Total OH/Total DL Hrs = $320,000/20,000 =$16 Product A: Spent 16 dlh in Painting dept and 4 dlh in the finishing dept equaling a total of 20 dlh. So OH used by Prod A = No of DLh * DL OH rate = 20*$16 = $320 So OH rate per unit for Product A is $320

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