Bergeron's Fine Furnishings manufactures upscale custom furniture. Bergeron's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,300,000 of manufacturing overhead to individual jobs. However, Diane Donaldson, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $760,000 of manufacturing overhead while the Finishing Department incurs $540,000 of manufacturing overhead. Donaldson has identified machine hours (MH) as the primary manufacturing overhead cost driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing Department. The Bergeron's plant completed Jobs 450 and 455 on May 15. Both jobs incurred a total of 6 DL hours throughout the entire production process. Job 450 incurred 2 MH in the Machining Department and 5 DL hours in the Finishing Department (the other DL hour occurred in the Machining Department). Job 455 incurred 7 MH in the Machining Department and 4 DL hours in the Finishing Department (the other two DL hours occurred in the Machining Department). Requirement 1. Compute the plantwide overhead rate assuming that Bergeron's expects to incur 25,000 total DL hours during the year. First identify the formula, then compute the rate. (Round your answer to the nearest whole dollar.) Plantwide overhead rate Requirement 2. Compute departmental overhead rates assuming that Bergeron's expects to incur 15,200 MH in the Machining Department and 18,000 DL hours in the Finishing Department during the year. First identify the formula, then compute the rate for each department. (Round your answers to the nearest whole dollar.) Machining Finishing Job 450 Job 455 + Machining Finishing Total overhead allocation Job 450 Requirement 3. If Bergeron's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455? First identify the formula, then calculate the amount of manufacturing overhead that would be allocated to the jobs if the plantwide overhead rate is used. (Round your answers to the nearest whole dollar.) = x Job 455 = Departmental overhead rate = per mach. hour per DL hour Requirement 4. If Bergeron's uses departmental overhead rates, how much manufacturing overhead would be allocated to Job 450 and Job 455? Use the following table to calculate the amount of manufacturing overhead that would be allocated to the jobs if the departmental overhead rates are used. (Round your answers to the nearest whole dollar.) Manufacturing overhead allocated Requirement 5. Based on your answers to Requirements 3 and 4, does the plantwide overhead rate overcost or undercost either job? Explain. If Bergeron's sells its furniture at 125% of cost, will its choice of allocation systems affect product pricing? Explain. The single plantwide rate Job 450 by and Since Bergeron's sets its sales price at 125% of cost, and the job cost is system it uses. Job 455 by by the allocation system it uses, its sales price will by the allocation
