Evan's Fine Furnishings manufactures upscale custom furniture. Evan's currently uses a plantwide overhead rate based on direct labor hours to allocate its $ 1,290,000 of manufacturing overhead to individual jobs. However, Diedra Able, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $ 870,000 of manufacturing overhead while the Finishing Department incurs $ 420,000 of manufacturing overhead. Diedra 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.
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The Evan's plant completed Jobs 450 and 455 on May 15. Both jobs incurred a total of 5 DL hours throughout the entire production process. Job 450 incurred 1 MH in the Machining Department and 4 DL hours in the Finishing Department (the other DL hour occurred in the Machining Department). Job 455 incurred 6 MH in the Machining Department and 3 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 Evan's expects to incur 30,000 total DL hours during the year. First identify the formula, then compute the rate. (Round your answer to the nearest whole dollar.) v = Plantwide overhead rate Requirement 2. Compute departmental overhead rates assuming that Evan's expects to incur 14,500 MH in the Machining Department and 17,500 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.) Departmental overhead rate Machining per mach. hour per DL hour Finishing Requirement 1. Compute the plantwide overhead rate assuming that Evan's expects to incur 30,000 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 cts to incur 14,500 MH in the Machining Department and 17,500 DL hours in the Finishing Department during the year. answers to the nearest whole dollar.) Cost allocation base (estimated) Requirement 2. Compute departmental ovel Total assets First identify the formula, then compute the ri lotal liabilities Total manufacturing overhead Total owners' equity Total revenues Machining Departmental overhead rate per mach. hour per DL hour Finishing Requirement 3. If Evan'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.) Manufacturing overhead allocated Job 450 xx x Job 455 Requirement 3. If Evan'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.) Manufacturing overhead allocated xxx Job 450 Job 455 Actual use of allocation base Allocated activity cost Requirement 4. If E Department cost allocation rate Use the following tat Estimated total indirect cost Plantwide overhead rate , how much manufacturing overhead would be allocated to Job 450 and Job 455? ring overhead that would be allocated to the jobs if the departmental overhead rates are used. (Round your answers to the nearest whole dollar.) Requirement 5. Based on your answers to Requirements 3 and 4, does the plantwide overhead rate overcost or undercost either job? Explain. If Evan'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 $ L and v Job 455 by $ L Since Evan's sets its sales price at 125% of cost, and the job cost is ne allocation system it uses, its sales price will by the allocation system it uses
