diant vs. departmental OH rates) Thompson Manufacturing makes a wide variety of products, all of which must be processed in the Cutting and the Assembly Departments. For the year 2007, Thompson has budgeted total overhead of $969,020, of which $383,400 will be incurred in Cutting and the remainder will be incurred in Assembly. Budgeted direct labor and machine hours are as follows:

a. What is the plantwide rate for overhead application based on (1) direct labor hours and (2) machine hours for the upcoming year? Round all computations to the nearest cent.

b. What are the departmental rates for overhead application in Cutting and Assembly using the most appropriate base in each department? Round all computations to the nearest cent.

c. What are the costs of products RW22SKI and the SD45ROW using (1) a plantwide rate based on direct labor hours, (2) a plantwide rate based on machine hours, and (3) departmental rates calculated in (b)?

d. A competitor manufactures a product that is extremely similar to RW22SKI and sells each unit of it for $270. Discuss how Thompson’s management might be influenced by the impact of the different product costs calculated in part (c).LO1.

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Cutting Assembly Budgeted direct labor hours Budgeted machine hours 27,000 2,100 3,000 65,800 Two products made by Thompson are the RW22SKI and the SD45ROW. The following cost and production time information on these items have been gathered: RW22SKI SD45ROW Direct material $34.85 $19.57 Direct labor rate in Cutting $14.00 $14.00 Direct labor rate in Assembly $6.50 $6.50 Direct labor hours in Cutting 6.00 4.80 Direct labor hours in Assembly 0.03 0.05 Machine hours in Cutting 0.06 0.15 Machine hours in Assembly 5.90 9.30