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Assume a company has two manufacturing departments Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The first
Assume a company has two manufacturing departments Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The first set of data below is budgeted data for the company as a whole that was estimated at the beginning of the year. The second set of data below is actual data for the company as a whole that was derived at the end of the year. The third set of data relates to one particular job completed during the year Job Z
Budgeted Data Assembly Fabrication
Manufacturing overhead costs $ $
Direct labor hours
Machine hours
Actual Data Assembly Fabrication
Manufacturing overhead costs $ $
Direct labor hours
Machine hours
Job Z Assembly Fabrication
Direct labor hours hours hours
Machine hours hour hours
The company is trying to decide if it should use a plantwide predetermined overhead rate based on direct laborhours or departmental predetermined overhead rates based on direct laborhours as the allocation base in Assembly and machinehours as the allocation base in Fabrication. If the company uses the plantwide approach, by how much will it undercost or overcost Job Z compared to if it had used the departmental approach?
Multiple Choice
Undercost by $
Overcost by $
Overcost by $
Undercost by $
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