Questions: Blue Ridge Marketing Inc. manufactures two 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. Direct - Overhead Labor Hours (dlh) Product A Product B Painting Dept. 254,600 9,200 dlh 4 dlh 9 dlh Finishing Dept. 69,900 11,400 4 7 Totals 324,500 20,600 dlh 8 dlh 16 dlh Using a single plantwide rate, the factory overhead allocated per unit of Product B is a. 110.70 b. 15.75 c. 252.00 d. 126.00

Blue Ridge Marketing Inc. manufactures two 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. Direct - Overhead Labor Hours (dlh) Product A Product B Painting Dept. 254,600 9,200 dlh 4 dlh 9 dlh Finishing Dept. 69,900 11,400 4 7 Totals 324,500 20,600 dlh 8 dlh 16 dlh Using a single plantwide rate, the factory overhead allocated per unit of Product B is a. 110.70 b. 15.75 c. 252.00 d. 126.00
Transcript text: Blue Ridge Marketing Inc. manufactures two 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. \begin{tabular}{crccc} & \multicolumn{4}{c}{ Direct } \\ & Overhead & \begin{tabular}{c} Labor Hours (dlh) \end{tabular} & Product A & Product B \\ \hline Painting Dept. & $\$ 254,600$ & $9,200 \mathrm{dlh}$ & 4 dlh & 9 dlh \\ Finishing Dept. & 69,900 & 11,400 & 4 & 7 \\ \cline { 2 - 5 } Totals & $\$ 324,500$ & $20,600 \mathrm{dlh}$ & 8 dlh & 16 dlh \\ \hline \hline \end{tabular} Using a single plantwide rate, the factory overhead allocated per unit of Product B is a. $\$ 110.70$ b. $\$ 15.75$ c. $\$ 252.00$ d. $\$ 126.00$
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Solution

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Solution Steps

To find the factory overhead allocated per unit of Product B using a single plantwide rate, we first calculate the plantwide overhead rate by dividing the total estimated overhead by the total direct labor hours. Then, we multiply this rate by the direct labor hours required for Product B to find the overhead allocated per unit.

Step 1: Calculate the Plantwide Overhead Rate

To find the plantwide overhead rate, divide the total estimated overhead by the total direct labor hours:

\[ \text{Plantwide Overhead Rate} = \frac{\text{Total Overhead}}{\text{Total Direct Labor Hours}} = \frac{324500}{20600} \approx 15.75 \]

Step 2: Calculate the Overhead Allocated per Unit of Product B

Multiply the plantwide overhead rate by the direct labor hours required for Product B:

\[ \text{Overhead per Unit of Product B} = \text{Plantwide Overhead Rate} \times \text{Product B Direct Labor Hours} = 15.75 \times 16 = 252.04 \]

Final Answer

The factory overhead allocated per unit of Product B is approximately \(\boxed{252.00}\). Therefore, the answer is c. \( \$ 252.00 \).

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