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How to solve this?
A Co. produces two products P and Q – that are both worked on in two departments – 1 and 2.
Each Unit of P spends 1 hr in dept. 1 and 2 hrs in dept. 2.
Each Unit of Q spends 2 hrs in dept. 1 and 2 hrs in dept. 2.The total budgeted production is as follows:
P 5,000 units
Q 10,000 unitsThe total budgeted overheads are as follows:
Department 1 $ 50,000
Department 2 $ 90,000What is the overhead cost per unit for Product P?
You need to calculate the overhead cost per hour in each of the two departments (by dividing the total cost by total hours for each department).
Then you can calculate the overhead cost for Product P by charging 1 hour at the cost per hour in dept 1 and also 2 hours at the cost per hour in dept 2.
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