Chapter 4 Homework eBook Show Me How Departmental Overhead Rates Mariposa, Inc., produces machine tools and currently uses a plantwide overhead rate, based on machine hours. Alice Chen, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than can a plantwide rate. Mariposa has the following data for its two departments for the coming year: Department A Department B Overhead costs (expected) 5720,000 $180,000 Normal activity (machine hours) 120,000 60,000 Required: 1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. X per machine hour 2. Compute predetermined overhead rates for each department using machine hours. Department A 6 per machine hour Department B 3 per machine hour 3. Suppose that a machine tool (Product X75) used 60 machine hours from Department A and 150 machine hours from Department B. A second machine tool (Product Y15) used 150 machine hours from Department A and 60 machine hours from Department B. Compute the overhead cost assigned to each product using the plantwide rate computed in Requirement 1. Product X75 Product Y15 Plantwide: 810 X 1,080 Repeat the computation using the departmental rates found in Requirement 2. Product X75 Product Y15 Departmental 180 Chapter 4 Homework Book Show Me How X per machine hour 2. Compute predetermined overhead rates for each department using machine hours. Department A 6 per machine hour Department B 3 per machine hour 3. Suppose that a machine tool (Product X75) used 60 machine hours from Department A and 150 machine hours from Department B. A second machine tool (Product Y15) used 150 machine hours from Department A and 60 machine hours from Department B. Compute the overhead cost assigned to each product using the plantwide rate computed in Requirement i Product X75 Product Y15 Plantwide $ 810 $ 1,080 x Repeat the computation using the departmental rates found in Requirement 2. Product X75 Product Y15 Departmental: 180 x Which of the two approaches gives the fairest assignment? Plantwide X 4. Repeat Requirement 3 assuming the expected overhead cost for Department B is $360,000. Product X75 Product Y15 Plantwide: 360 X 900 Departmental: 900 X 360 x Would you recommend departmental rates over a plantwide rate? I recommend a plantwide rate X