1.Calculate the manufacturing overhead cost of the A Frame using:

(a) a predetermined plantwide rate based on direct labour hours

(b) a predetermined plantwide rate based on machine hours

(c) predetermined departmental rates based on direct labour hours for the cutting department and on machine hours for the welding department. Which of these three estimates of overhead cost is likely to be the most accurate? Explain.

2.Calculate the manufacturing overhead cost of the A Frame, using an actual costing system and departmental overhead rates based on labour hours for cutting and on machine hours for welding. Explain why cost drivers must be used with actual costing as well as with normal costing.

3. Which estimate of overhead costs is likely to be more accurate that based on predetermined departmental rates or that based on actual departmental rates? Explain.

P7.37 Plantwide versus departmental overhead rates; actual and normal costing: manufacturer Noteperfect Ltd manufactures sheet music stands in two separate departments, cutting and welding. The following data relate to the year just ended: LO7.3 7.4 7.7 Welding department $120 000 Total plant $180 000 162 000 Cutting department $60 000 54 000 24 000 27 000 30 000 29 400 Budgeted manufacturing overhead Actual manufacturing overhead Budgeted machine hours Actual machine hours Budgeted direct labour hours Actual direct labour hours 108 000 96 000 120 000 117 000 90 000 15 000 11 700 45 000 41 100 PART TWO COSTS AND COSTING SYSTEMS One of Noteperfect's major products, the A Frame, has the following production requirements: Product: A Frame Cutting department Welding department Machine hours 2.5 4.0 Total plant 6.5 5.0 Direct labour hours 4.0 1.0