I need to solve this cost accounting problem. Please, see the attachment. Thank you.
1. Arnold Company manufactured two products, A and B, during April. For purposes of product costing, an overhead rate of application of $2.50 per direct-labor hour was used, based on budgeted annual factory overhead of $500,000 and 200,000 budgeted annual direct-labor hours, as follows:
The number of labor hours required to manufacture each of these products was:
During April, production units for products A and B were 1,000 and 3,000.
(1) Using a plantwide overhead rate, what are total overhead costs assigned to products A and B, respectively?
(2) Using departmental overhead rates, what are total overhead costs assigned to products A and B, respectively?
(3) Assume that materials and labor costs per unit of Product A are $10 and that the selling price is established by adding 40% of absorption costs to cover profit and selling and administrative expenses. What difference in selling price would result from the use of departmental overhead rates?
The solution contains the plant wide and department wide overhead rates for two products and also computation of selling price when both the methods are used.