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Wever Ridge Marketing Inc. manufactures multiple products, but two specifically,

ID: 2460993 • Letter: W

Question

Wever Ridge Marketing Inc. manufactures multiple products, but two specifically, 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.

Estimated Direct Labor Hours (dlh) Per Dept

Product Usage of DLH

Departments

Overhead

Product A

Product B

Painting Dept.

$248,000

10,000 dlh

  16 dlh

    4 dlh

Finishing Dept.

  72,000

10,000    

   4   

   16

Totals

$320,000

20,000 dlh

  20 dlh

   20 dlh





Determine the overhead rate in the Painting Department.

$12.40 per dlh

$24.80 per dlh

$7.20 per dlh

$16.00 per dlh

Estimated Direct Labor Hours (dlh) Per Dept

Product Usage of DLH

Explanation / Answer

Overhead rate = Total estimated overheads / Total estimated direct labor hours

Estimated overheads of Painting department = $248,000

Estimated direct labor hours of painting department = 10,000 dlh

Overhead rate in the painting department = $248,000/10,000 dlh = $24.80 per dlh

Hence answer is B. $24.80 per dlh

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