Vulcan Molding has three production departments: A, B, and C. At the start of the year, the company estimated that it would incur \($2,000,000\) of direct labor cost and \($6,000,000\) of manufacturing overhead as follows:

Along with many others, the following three jobs were worked on during the year:

Required
a. Calculate the overhead that would be assigned to eacbi job assuming the company uses 1 plant-wide overhead allocation rate based on expected labor cost.
b. Calculate the overhead that would be assigned to each job assuming the company uses a separate overhead allocation rate for each production department based on direct labor cost.
c. Which is preferable—a single overhead rate or separate rates by production department? Explain.

Transcribed Image Text:

Dept. B $2,000,000 Dept. C $3,000,000 Total $6,000,000 Estimated overhead Estimated direct labor Dept. A $1,000,000 $500,000 Overhead rate $2.00 $4.00 $500,000 $1,000,000 $2,000,000 $3.00 $3.00