Kool-Air Galore, Inc. manu- factures air conditioners for automobiles. The company designs its products with flexibility to accommodate many makes and models of automobiles. The main products are MaxiFlow and Alaska. MaxiFlow uses a few complex fabricated parts, but these have been found easy to assemble and test. On the other hand, Alaska uses many standard parts but has complex assembly and test processes. The fol- lowing planning information is available for 1996 for each department:

Required:
1. Compute the departmental overhead rates using machine hours as the cost driver.

2. Compute a company-wide overhead rate using machine hours as the cost driver.

3. Compute the overhead cost per batch of MaxiFlow and Alaska assuming

(a) The company-wide rate.

(b) The departmental rates.

4. Compute the total cost per unit of MaxiFlow and Alaska assuming:

(a) The company-wide rate,

(b) The departmental rates.

5. Is one product affected more than the other by use of departmental rates rather than a company-wide rate? Why or why not?

32. Service Center Allocation and Dual-Rate Method. MumsDay Corporation manu- factures a complete line of fiberglass attach cases and suitcases. MumsDay has three manufacturing departments-Molding, Component, and Assembly--and two service centers-Power and Maintenance. The sides of the cases are manufactured in the Molding Department. The frames, hinges, locks, etc., are manufactured in the Component Department. The cases are completed in the Assembly Department. Varying amounts of materials, time, and effort are required for each of the various cases. The Power Department and the Maintenance Department provide services to the three manufacturing de- partments. MumsDay has always used a plant-wide overhead rate. Direct labor hours are used to assign the overhead to its product. The predetermined rate is calculated by dividing the company's total estimated overhead by the total estimated direct labor hours to be worked in the three manufacturing departments. Whit Portlock, manager of Cost Accounting, has recommended that MumsDay use departmental overhead rates. The planned operating costs and expected levels of activity for the coming year have been developed by Portlock and are presented by department in the following schedules (000s omitted):

Required:

1. Calculate the plant-wide overhead rate for MumsDay Corporation for the com- ing year using the same method as used in the past.

2. Whit Portlock has been asked to develop departmental overhead rates for comparison with the plant-wide rate. The following steps are to be used in developing the departmental rates:

(a) The Maintenance Department costs should be allocated to the three manufacturing departments using the direct method.

(b) The Power Department costs should be allocated to the three manufacturing departments using the dual-rate method, i.e., the fixed costs allocated according to practical capacity and the variable costs according to planned usage.

(c) Calculate departmental overhead rates for the three manufacturing departments using a machine hour base for the Molding Department and a direct labor hour base for the Component and Assembly Departments.

3. Should MumsDay Corporation use a plant-wide rate or departmental rates to assign overhead to its products? Explain your answer.

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Overhead Machine Cost Hours Radiator parts fabrication $ 80,000 10,000 Radiator assembly, weld, and test 100,000 20,000 Compressor parts fabrication 120,000 5,000 Compressor assembly and test 180,000 45,000 Total.... $480,000 80,000 A production batch of 20 units requires the following number of hours in each department: Radiator parts fabrication Radiator assembly, weld, and test Compressor parts fabrication Compressor assembly and test Total... MaxiFlow Alaska 28 16 30 74 32 8 26 66 116 164