The Aleutian Company produces two products, Rings and Dings. They are manufactur

Question

The Aleutian Company produces two products, Rings and Dings. They are manufactured in two departments, Fabrication and assembly. Data for the products and departments are listed below. Product Number of units Labor hrs per unit Machine hours per unit Rings 1,000 4 6 Dings 2,000 3 9 All of the machine hours take place in the Fabrication department, which has an estimated overhead of $90,000. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $105,000. The Aleutian Company uses a departmental overhead rates. The fabrication department uses machine hours for an allocation base, and the assembly department uses labor hours. What is the overhead cost per unit for Rings?

a. $65.25

b. $23.25

c. $44.10

d. $64.50

Explanation / Answer

The Aleutian Company All Amounts in $ Product No.of Labor Machine Units Hours Hours per unit per unit Rings 1000 4 6 Dings 2000 3 9 Total 7 15 Total Overheads for Fabrication Department 90000 Total Overheads for Assembly Department 105000 Fabrication Overheads allocated to Rings 36000 Assembly Overheads allocated to Rings 60000 Total Overheads allocated to Rings 96000 Overheads per unit allocated 96 The answer closest to this is $ 65.25, hence that can be considered as the correct solution although $ 96 should have been listed in the options.

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