Farmer's Fine Furnishings manufactures upscale custom furniture. Farmer's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,250,000 of manufacturing overhead to individual jobs. However, Donna Burger, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $770,000 of manufacturing overhead while the Finishing Department incurs $480,000 of manufacturing overhead. Burger 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 (Click the icon to view the job information.) Read the requirements Requirements Requirement 1. Compute the plantwide overhead rate assuming that Farmer's expects to incur 31,250 total DL hours during the year. First identify the formula, then compute the rate. (Round your answer to the nearest whole dollar.) Total manufacturing overhead Cost allocation base (estimated) Plantwide overhead rate 1,250,000 31,250 40 Requirement 2. Compute departmental overhead rates assuming that Farmer's expects to incur 15,400 MH in the Machining Department and 16,000 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.) Departmental Total department overhead Cost allocation base (estimated) overhead rate Machining $ 770,000 = $ 50 per mach, hour Finishing $ 480,000 16,000 $ 30 per DL hour 1. Compute the plantwide overhead rate assuming that Farmer's expects to incur 31,250 total DL hours during the year. 2. Compute departmental overhead rates assuming that Farmer's expects to incur 15,400 MH in the Machining Department and 16,000 DL hours in the Finishing Department during the year. 3. If Farmer's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455? 4. If Farmer'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 undercost either job? Explain. If Farmer's sells its furniture at 125% of cost, will its choice of allocation systems affect product pricing? Explain. 15,400 = Print Done Requirement 3. If Farmer'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 More Info Plantwide overhead rate Actual use of allocation base allocated x Job 450 5 = Job 455 5 The Farmer'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 2 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). Print Done Choose from any list or enter any number in the input fields and then click Check
