Adirondak 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. Calculate the plantwide factory overhead rate:
A) $25.00 per dlh
B) $0.07 per dlh
C) $14.77 per dlh
D) $ 6.25 per dlh

Question

Adirondak 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.  Calculate the plantwide factory overhead rate:
A) $25.00 per dlh 
B) $0.07 per dlh 
C) $14.77 per dlh 
D) $ 6.25 per dlh

Quizplus · Accepted Answer

The plantwide factory overhead rate can be calculated by dividing the total estimated factory overhead costs by the total estimated direct labor hours. From the information given in the problem, we have:
Total estimated factory overhead costs = $590,000 + $220,000 = $810,000
Total estimated direct labor hours = 54,000 + 16,000 = 70,000
Plantwide factory overhead rate = $810,000 ÷ 70,000 = $14.77 per dlh. Therefore, choice C is the correct answer.