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. Determine the overhead rate in the Painting Department for each unit of Product B if the company uses a multiple department rate system.
A) $12.40 per dlh
B) $24.80 per dlh
C) $7.20 per dlh
D) $16.00 per dlh

Question

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.  Determine the overhead rate in the Painting Department for each unit of Product B if the company uses a multiple department rate system.
A) $12.40 per dlh 
B) $24.80 per dlh 
C) $7.20 per dlh 
D) $16.00 per dlh

Quizplus · Accepted Answer

To calculate the overhead rate for the Painting Department if the company uses a multiple department rate system, we first need to calculate the total overhead for the department. 
Total overhead for the Painting Department = Estimated overhead for Painting Department / Estimated direct labor hours for Painting Department 
= $30,800 / 1,240 dlh = $24.80 per dlh 
Therefore, the overhead rate in the Painting Department for each unit of Product B is $24.80 per dlh.