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

To calculate the plantwide factory overhead rate, we need to divide the estimated total overhead cost for the year by the estimated total direct labor hours for the year. 
Using the information given in the question,
Total estimated factory overhead cost = $2,213,100 
Total estimated direct labor hours = 150,000 dlh 
Therefore, the plantwide factory overhead rate = $2,213,100 ÷ 150,000 dlh = $14.77 per dlh.