Question

Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. Product Number of Units Labor Hours Per Unit Machine Hours Per Unit Blinks 1,000 4 5 Dinks 2,000 2 8 All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $72,000. Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs. The single plantwide rate, if it is based on machine hours instead of labor hours, is a.$7.43 per machine hour b.$19.50 per machine hour c.$9.00 per machine hour d.$4.00 per machine hour

Answer 1

OAR = $4 per machine hour

Step-by-step explanation:

Plant wide overhead absorption rate (OAR)

= Estimated overhead/Estimated total machine hours

Estimated machine hours = (5 × 1000) +( 8× 2000) = 21,000 machine hours

OAR = $84,000/21,000 machine hour= $4 per machine hour

OAR = $4 per machine hour