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Cregg's Fine Furnishings manufactures upscale custom furniture. Cregg's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,200,000 of manufacturing

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Cregg's Fine Furnishings manufactures upscale custom furniture. Cregg's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,200,000 of manufacturing overhead to individual jobs. However, Dana Johnson, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $780,000 of manufacturing overhead while the Finishing Department incurs $420,000 of manufacturing overhead. Johnson 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. i(Click the icon to view the job information.) X - X More info Requirements The Cregg's plant completed Jobs 450 and 455 on May 15. Both jobs incurred a 1. Compute the plantwide overhead rate assuming that Cregg's expects to incur 20,000 total DL total of 6 DL hours throughout the entire production process. Job 450 incurred 1 hours during the year. MH in the Machining Department and 5 DL hours in the Finishing 2. Compute departmental overhead rates assuming that Cregg's expects to incur 15,600 MH in the Department (the other DL hour occurred in the Machining Department). Job 455 Machining Department and 17,500 DL hours in the Finishing Department during the year. 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). 3. If Cregg's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455? 4. If Cregg's uses departmental overhead rates, how much manufacturing overhead would be allocated to Job 450 and Job 455? 5. Based on your answers to Requirements 3 and 4, does the plantwide overhead rate overcost or Print Done undercost either job? Explain. If Cregg's sells its furniture at 125% of cost, will its choice of allocation systems affect product pricing? Explain. Print Done

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