Plantwide versus department overhead cost rates. (CMA) The MumsDay Corporation manufactures a complete line of fibreglass attache cases and suitcases. MumsDay has three manufacturing departments (moulding, component, and assembly) and two support depart¬

ments (maintenance and power).

The sides of the cases are manufactured in the moulding department. The frames, hinges, locks, and so on are manufactured in the component department. The cases are com¬

pleted in the assembly department. Varying amounts of materials, time, and effort are required for each of the various cases. The maintenance and power departments provide services to the three manufacturing departments.

MumsDay has always used a plantwide manufacturing overhead rate. Direct manufac¬

turing labour-hours are used to allocate the overhead to each product. The budgeted rate is calculated by dividing the company’s total budgeted manufacturing overhead cost by the total budgeted direct labour-hours to be worked in the three manufacturing departments.

Whit Portlock, manager of Cost Accounting, has recommended that MumsDay use department overhead rates. Portlock has projected operating costs and production levels for the coming year. They are presented (in thousands) by department in the following tables:

Manufacturing Department Moulding Component Assembly Department operating data Direct manufacturing labour-hours 500 2,000 1,500 Machine-hours 875 125 _ Department costs Direct manufacturing materials $14,880 $36,000 $ 1,500 Direct manufacturing labour 4,200 24,000 14,400 Manufacturing overhead 25,200 19,440 27,120 Total departmental costs $44,280 $79,440 $43,020 Use ofsupport departments Estimated usage of maintenance resources in labour-hours for coming year 90 25 10 Estimated usage of power (in kilowatt-hours) for coming year 360 320 120 Estimated costs of the maintenance department are $4,800 and of die power department are $22,080.
Required 1. Calculate the plantwide overhead rate for the MumsDay Corporation for the coming year using the same method as used in the past.
2. Whit Portlock has been asked to develop department overhead rates for comparison with the plantwide rate. Follow these steps in developing the department rates:

a. Allocate the maintenance department and power department costs to the three manu¬
facturing departments.

b. Calculate department overhead rates for the three manufacturing departments using a machine-hour allocation base for the moulding department and a direct manufacturing labour-hour allocation base for the component and assembly departments.
3. bhould the MumsDay Corporation use a plantwide rate or department rates to allocate overhead to its products? Explain your answer.