Question

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. Product Number of Units Direct Labor Hours per Unit Machine Hours per Unit Rings 1,000 4 6 Dings 2,000 3 9 All of the machine hours take place in the Fabrication Department, which has estimated total factory overhead of $90,000. All of the labor hours take place in the Assembly Department, which has estimated total factory overhead of $105,000. Aleutian Company uses the multiple production department factory overhead rate method. The Fabrication Department uses machine hours as an allocation base, and the Assembly Department uses direct labor hours. 11. The total factory overhead allocated per unit of Rings is a. $65.25 b. $23.25 c. $44.10 d. $64.50

Answer 1

Answer: D. $64.5

Explanation:

Given the following ;

Unit of Dings = 2000

Unit OF Rings = 1000

ASSEMBLY DEPARTMENT :

Direct labor hours(Rings) = 4

Direct labor hours(Dings) = 3

FABRICATION DEPARTMENT :

Direct Machine hours(Rings) = 6

Direct Machine hours(Dings) = 9

USING THE MULTIPLE PRODUCTION DEPARTMENT FACTORY OVERHEAD RATE

OVERHEAD RATE BY Department :

ASSEMBLY department :

Allocation base ( direct labor hours)

Overhead rate = Estimated total actor overhead ÷ total unit of allocation base

$105,000 ÷ (4×1000)+(3×2000) =

$105,000 ÷ 10000 = $10.5

FABRICATION department :

Allocation base ( direct Machine hours)

Overhead rate = Estimated total actor overhead ÷ total unit of allocation base

$90,000 ÷ (6×1000)+(9×2000)

$90,000 ÷ 24,000 = $3.75

Total factory overhead allocated per unit of Ring =

Assembly department = (4 × $10.5) = $42.0

Fabrication department = (6 × $3.75)

$22.5

$(42.0 + 22.5) = $64.5

Answer 2

Answer:

The total factory overhead allocated per unit of Rings is $53.25 (non of the above suggestions)

Explanation:

First Determine the Overhead Rates for each department

Assembly Department :

Overhead Rates = Total Overhead Cost / Total Cost Driver (Allocation Base)

Note : Assembly Department uses direct labor hours as allocation base

                           =  $105,000 / (1000×4+2000×3)

                           =  $ 10.50 per direct labor hour

Fabrication Department :

Overhead Rates = Total Overhead Cost / Total Cost Driver (Allocation Base)

Note : Fabrication Department uses machine hours as an allocation base

                           =  $90,000 / (1000×6+2000×9)

                           =  $ 3.75 per machine hour

Then Allocate cost to Ring

Assembly Department = ($ 10.50 × 4)             $42.00

Fabrication Department = ( $3.75 × 3)             $11.25

The Total factory overhead per unit of Ring  $53.25