64. (Plant vs. department OH rates) Bass Fine Furniture has two departments: Fabrication and Finishing. Fabrication is
Question:
64. (Plant vs. department OH rates) Bass Fine Furniture has two departments: Fabrication and Finishing. Fabrication is composed of 2 workers and 25 machines, and Finishing has 25 workers and 3 machines. One of the company’s products passes through both departments and uses the following quantities of direct labor and machine time:
Fabrication Finishing Machine hours 8.00 0.15 Direct labor hours 0.02 2.00 Following are the budgeted overhead costs and volumes for each department for the upcoming year:
Fabrication Finishing Estimated overhead $624,240 $324,000 Estimated machine hours 72,000 9,300 Estimated direct labor hours 4,800 48,000
a. What is the plantwide rate for overhead application based on machine hours for the upcoming year? How much overhead will be assigned to each unit using this rate?
b. The company’s auditors inform Bass that it would be more appropriate to use machine hours as the application base in Fabrication and direct labor hours in Finishing. What would the rates be for each department? How much overhead would have been assigned to each unit of product using departmental rates?
Step by Step Answer:
Cost Accounting Traditions And Innovations
ISBN: 9780324180909
5th Edition
Authors: Jesse T. Barfield, Cecily A. Raiborn, Michael R. Kinney