Levine Company Levine Company produces two products: A and B The company has three overhead functions that are required for both products.
Below is production information for Products A and B:
The company produces 800 units of Product A and 8,000 units of Product B each period.
The overhead functions have the following hourly costs:
Refer to Levine Company If total overhead is assigned to A and B on the basis of units produced,Product B will have an overhead cost per unit of
A)$84.00.
B)$88.64.
C)$110.64.
D)None of the responses are correct.

Question

Levine Company Levine Company produces two products: A and B The company has three overhead functions that are required for both products.
Below is production information for Products A and B:
 The company produces 800 units of Product A and 8,000 units of Product B each period.
The overhead functions have the following hourly costs:
 Refer to Levine Company If total overhead is assigned to A and B on the basis of units produced,Product B will have an overhead cost per unit of
A)$84.00. 
B)$88.64. 
C)$110.64. 
D)None of the responses are correct.

Quizplus · Accepted Answer

The total overhead cost is $198,400 ($120,000 + $54,400 + $24,000).

To assign overhead on the basis of units produced, we need to calculate the overhead rate per unit of each product.

For Product A:

Overhead rate per unit = Total overhead cost for A / Number of units of A produced

= $198,400 / 800 units

= $248 per unit

For Product B:

Overhead rate per unit = Total overhead cost for B / Number of units of B produced

= $198,400 / 8,000 units

= $24.80 per unit

Therefore, Product B will have an overhead cost per unit of $88.64 ($24.80 + $63.84).

So, the best choice is B.

Levine Company Levine Company Produces Two Products: a and B