58. (Mixed costs and predetermined overhead rates; two bases) King-O’Brien Enterprises makes fiberglass swimming pools in a two-department process: Production and Installation. Production is highly automated and machine hours are used as the basis for allocating departmental overhead. Installation is labor intensive and uses direct labor hours to apply overhead. Cost information for various activity levels follows for each department:

ACTIVITY IN MACHINE HOURS (MHs)

Low High 3,000 4,000 5,000 Production overhead costs:

Variable $12,150 $16,200 $20,250 Fixed 7,950 7,950 7,950 Total $20,100 $24,150 $28,200 ACTIVITY IN DIRECT LABOR HOURS (DLHs)
Low High 1,000 2,000 3,000 Installation overhead costs:
Variable $14,250 $28,500 $42,750 Fixed 6,150 6,150 6,150 Total $20,400 $34,650 $48,900 Each pool is estimated to require 500 machine hours in Production and 250 hours of direct labor in Installation. Expected annual capacity is 120 pools. The company plans to produce and install 10 pools next month.

a. Compute the variable and fixed values in the formula y  a  bX for each department.

b. Prepare a budget for next month’s variable, fixed, and total overhead costs for each department assuming expected production is 10 pools.

c. Calculate the predetermined total overhead cost to be applied to each pool scheduled for production in the coming month if expected annual capacity is used to calculate the predetermined overhead rates.