Perfect Image Ltd produces two types of computer printers, a laser model and an inkjet model, which

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Perfect Image Ltd produces two types of computer printers, a laser model and an inkjet model, which pass through two production departments. Fabrication and Assembly. The following data relate to the year just ended:

Assembly Fabrication $135 000 Budgeted overhead Expected activity (in direct labour hours) Expected activity (in machine

Actual overhead costs for the year were $450,000.

Laser Inkjet 11 250 $90 000 Units produced Prime costs (material and labour) Direct labour hours used: Fabrication Assem

Required:
1. Calculate the predetermined plantwide overhead rate based on direct labour hours.
2. Calculate the per unit cost of the laser and inkjet printers, based on a plantwide overhead rate assuming that direct labour hours is the cost driver.
3. Calculate predetermined departmental overhead rates, assuming that machine hours is the cost driver in Fabrication and direct labour hours is the cost driver in Assembly.
4. Calculate the per unit cost of the laser and inkjet printers, based on the departmental overhead rates.
5. Estimate the amount of underapplied or overapplied overhead using:
(a) Plantwide overhead rate.
(b) Departmental overhead rates.
6. Which approach is best for Perfect Image: a plantwide overhead rate or departmental overhead rates? Why?

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Management Accounting

ISBN: 9781760421144

7th Edition

Authors: Kim Langfield Smith, Helen Thorne, David Alan Smith, Ronald W. Hilton

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