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    Plant wide& department wide overhead rate & selling price

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    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?

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    Solution Summary

    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.