OAR

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February 21, 2014 at 4:03 am #159656
ashvin982
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Sir, am having problem with the ‘twice as many’..please explain..Thanks

A company makes two products, Reds and Blues. Total F.OHD to absorb during May are $60000, Budgeted Prod levels for Red for May are 10000 units.
Twice as many Blues as Reds are to be produced. Each Red takes 1 hour of labour and each Blue takes 0.25 hours.
OHDs are to be absorbed on a labour hour basis.
What is the OAR for each finished Blue?
February 21, 2014 at 10:07 am #159683
John Moffat
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Twice as many means 2 x as many.

So since they are producing 10000 units of red, it means that the production of Blue will be 2 x 10000 = 20000 units.
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