Adirondack 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. Overhead Total Direct Labor Hours DLH per Product A B Painting Dept. $245,600 9,500 7 7 Finishing Dept. 82,500 11,500 3 4 Totals $328,100 21,000 10 11 Using a single plantwide rate, the factory overhead allocated per unit of Product A in the Painting Department. Calculate the overhead rate per unit for Product A in the painting department of Adirondack Marketing Inc.

The factory overhead allocated per unit of Product A in the Painting Department = 7 *  15.623= $ 109.37

Plantwide Overhead Rate=  $328,100  /21000= 15.623

Explanation:

                   Overhead Total Direct Labor Hours DLH per Product A B

Painting Dept. $245,600           9,50                                    7       7

Finishing Dept.  82,500              1 1,500                               3         4

Totals                $328,100           21,000                             10           11

Plantwide Overhead Rate= Total Manufacturing Overhead/ Direct Labor Hours

Plantwide Overhead Rate=  $328,100  /21000= 15.623

The factory overhead allocated per unit of Product A in the Painting Department = 7 *  15.623= $ 109.37

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