Purinton Printing Products has one divi- sion that makes rollers for printing presses. The rollers vary in size from 1/4 inch to 8 inches in diameter. Fabrication and Finishing are the two departments within this division. The company uses machine hours as the base for allocating factory over- head costs to products. The budgeted data for the two departments for the coming year are:

Required:

1. Compute the departmental overhead rates for Fabrication and Finishing using machine hours as the cost driver.

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

3. Compute the overhead cost per batch of product assuming:

(a) The plant-wide rate.

(b) The departmental rates.

4. Is the total cost per unit of each product distorted by using a plant-wide rate instead of departmental rates? Explain with supporting computations.

Transcribed Image Text:

Machine hours... Overhead costs Fabrication 90,000 $2,232,000 Finishing Totals 30,000 $252,600 120,000 $2,484,600 The machine hours for a batch of 100 units for two different products are given as: Fabrication Finishing Totals 1/2" roller 12 6-1/2" roller. 9 6 15 The prime costs per batch for these two products are 1/2" roller 6-1/2" roller Direct materials: Fabrication. Finishing Direct labor: Fabrication. $ 18.90 $ 33.40 9.70 11.50 48.10 187.30 Finishing 37.80 32.20 Total prime costs. $114.50 $264.40