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)	$792,000	$198,000
Normal activity (machine hours)	110,000	55,000

Required:

1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. $fill in the blank 1 per machine hour

2. Compute predetermined overhead rates for each department using machine hours. Round your answers to one decimal place.

Department A	$fill in the blank 2 per machine hour
Department B	$fill in the blank 3 per machine hour

3. Suppose that a machine tool (Product X75) used 50 machine hours from Department A and 140 machine hours from Department B. A second machine tool (Product Y15) used 140 machine hours from Department A and 50 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:	$fill in the blank 4	$fill in the blank 5

Repeat the computation using the departmental rates found in Requirement 2.

	Product X75	Product Y15
Departmental:	$fill in the blank 6	$fill in the blank 7

Which of the two approaches gives the fairest assignment?

DepartmentalPlantwide

4. Repeat Requirement 3 assuming the expected overhead cost for Department B is $396,000.

	Product X75	Product Y15
Plantwide:	$fill in the blank 9	$fill in the blank 10
Departmental:	$fill in the blank 11	$fill in the blank 12

Would you recommend departmental rates over a plantwide rate?

I recommend a plantwide rateI recommend departmental ratesIt doesn't matter which is chosen

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