The 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. The Ramapo Company uses a single overhead rate to apply all overhead costs based on labor hours. What is the overhead cost per unit for Dinks?

Overhead per unit = $78 per unit

Explanation:

Giving the following information:

Blinks:

Number of units = 1,000

Labors hours per unit = 4

Machine hours = 5

Dinks:

Number of units = 2,000

Labors hours per unit = 2

Machine hours = 8

Overhead:

Fabrication Department = $84,000.

Assembly department = $72,000.

First, we need to calculate the estimated overhead rate to allocate overhead to Dinks.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Total direct labor hours = (4*1,000) + (2*2,000) = 8,000 labor hours

Estimated manufacturing overhead rate = (84,000 + 72,000) / 8,000 = $19.5 per labor hour

Now, we can allocate overhead to Dinks:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH = 19.5 * 4,000 = $78,000

Overhead per unit = 78,000/1,000 = $78 per unit