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. 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 departmental overhead rates. The Fabrication Department uses machine hours for an allocation base, and the Assembly Department uses labor hours.
What is the overhead cost per unit for Dings?
A) $65.25
B) $56.75
C) $23.25
D) $64.50

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.  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 departmental overhead rates. The Fabrication Department uses machine hours for an allocation base, and the Assembly Department uses labor hours.
What is the overhead cost per unit for Dings?
A) $65.25 
B) $56.75 
C) $23.25 
D) $64.50

Quizplus · Accepted Answer

To calculate the overhead cost per unit for Dings, we need to calculate the total overhead cost for each department and then allocate it to each product based on their respective allocation bases.

Fabrication Department overhead rate = Estimated overhead / Allocation base = $90,000 / 10,000 machine hours = $9/hour
Assembly Department overhead rate = Estimated overhead / Allocation base = $105,000 / 20,000 labor hours = $5.25/hour

Now, we can calculate the overhead cost per unit for Dings as follows:

Fabrication Department overhead cost per unit of Dings: 
= Fabrication overhead rate x machine hours for Dings 
= $9/hour x 2 machine hours per unit x 1,000 units = $18,000 
= $18 per unit

Assembly Department overhead cost per unit of Dings: 
= Assembly overhead rate x labor hours for Dings 
= $5.25/hour x 1 labor hour per unit x 1,000 units = $5,250 
= $5.25 per unit

Total overhead cost per unit of Dings: 
= Fabrication overhead cost per unit + Assembly overhead cost per unit 
= $18 per unit + $5.25 per unit 
= $23.25 per unit

Therefore, the overhead cost per unit for Dings is $23.25. The correct answer is (A).

The Aleutian Company Produces Two Products, Rings and Dings