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 fabrication department overhead rate per machine hour? A. $10.50 B. $9.00 C. $8.12 D. $3.75

Explanation / Answer

Given that all the machine hours are taken in Fabrication department

then total machine hours = 1,000*6 + 2,000*9 = 24,000 macine hours

overhead of FAbrication department = $90,000

then Fabrication department overhead rate per machine hour = $90,000/24,000 = $3.75

Hence ans D is correct

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