Blalock Company manufactures and distributes several different products. The com

Question

Blalock Company manufactures and distributes several different products. The company currently uses a plantwide allocation method for allocating overhead at a rate of $10 per direct labor hour. Department A produces Products #101X and #102Y. Department A has $262,000 in traceable overhead. Department B manufacturers Product #103Z. Department B has $128,000 in traceable overhead. The product cost (per unit) and other information are as follows:

Products

Direct Materials

Required:

a. If Blalock changes its allocation basis to machine hours, what is the total product cost per unit for Product 101X, 102Y, and 103Z?

b. If Blalock changes its overhead allocation to departmental rates, what are the product costs per unit for Product 101X, 102Y, and103Z, assuming Departments A and B use direct labor hours and machine hours as their respective alloction bases?

101X 102Y 103Z

Direct Materials

$60.00 $58.00 $46.00 Direct Labor 42.00 31.50 12.00 Overhead 40.00 30.00 20.00 $142.00 $119.50 $78.00 Machine hours (per unit) 4 2 3 Number of cases (per year) 3,000 5,000 6,000

Explanation / Answer

a).

Total Overhead = $262000 + $128000 = $390000

Total Machine Hours = 4*3000 + 2*5000 + 3*6000 = 12000 + 10000 + 18000 = 40000

Overhead Rate per Machine Hour = $390000/40000 = 9.75 per hour

Product Cost Per unit :-

b) Overhead Rate :-

Department A = $262000 / (12000+15000) = 9.7 per direct labor hour

Department B = $128000 / 18000 = 7.11 per machine hour

Particulars 101X 102Y 103Z Direct Material $60.00 $58.00 $46.00 Direct Labor $42.00 $31.50 $12.00 Overhead (Overhead Rate*Machine Hour) $39 $19.5 $29.25 Product Cost per unit $141 $109 $87.25

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