Departmental Overhead Rate: Home Run Practice Problem

Hill Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 20X5, the following estimates were provided for the coming year:

	Machining	Assembly	Total
Direct labor-hours	10,000 dlh	90,000 dlh	100,000 dlh
Machine-hours	100,000 mh	5,000 mh	105,000 mh
Direct labor cost	$80,000	$720,000	$800,000
Manufacturing overhead costs	$250,000	$360,000	$610,000

The accounting records of the company show the following data for Job #846:

	Machining	Assembly
Direct labor-hours	50 dlh	120 dlh
Machine-hours	170 mh	10 mh
Direct material cost	$2,700	$1,600
Direct labor cost	$400	$900

Required: SHOW CALCULATIONS FOR ALL AND EXPLAIN IF POSSIBLE!!!

A. Compute the plant-wide overhead allocation rate using direct labor hour as allocation basis.

B. Compute the total cost of Job #846 using direct labor hour as allocation basis.

C. Compute manufacturing overhead allocation rate for each department (Departmental rate).

D. Compute the total cost of Job #846 using departmental overhead allocation rate.

E. Provide possible reasons why Hill Manufacturing uses two different cost allocation rates.