need help with requirement 5
1. Compute the plantwide overhead rate assuming that Harrison's expects to incur 26,000 total DL hours during the year. 2. Compute departmental overhead rates assuming that Harrison's expects to incur 15,000 MH in the Machining Department and 17,400 DL hours in the Finishing Department during the year. 3. If Harrison's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455? 4. If Harrison'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 Harrison's sells its furniture at 125% of cost, will its choice of allocation systems affect product pricing? Explain. Harrison's Fine Furnishings manufactures upscale custom furniture. Harrison's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,170,000 of manufacturing overhead to individ jobs. However, Diana Fuller, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $735,000 of manufacturing overhead while the Finishing Department incurs $435,000 of manufacturing overhead. Diana has identified machine hours (MH) as the primary manufacturing overhead cost driver in the Machining Department a direct labor (DL) hours as the primary cost driver in the Finishing Department. (Click the icon to view the job information.) Read the requirements. Requirement 1. Compute the plantwide overhead rate assuming that Harrison's expects to incur 26,000 total DL hours during the year. First identify the formula, then compute the rate. (Round your answer to the nearest whole dollar.) Cost allocation base (estimated) Total manufacturing overhead 1,170,000 = = Plantwide overhead rate $ 45 $ 26,000 Requirement 2. Compute departmental overhead rates assuming that Harrison's expects to incur 15,000 MH in the Machining Department and 17,400 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.) / Total department overhead 735,000 Cost allocation base (estimated) 15,000 = = $ Departmental overhead rate 49 per mach. hour 25 per DL hour Machining Finishing $ 435,000 17,400 = $ Requirement 3. If Harrison'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.) Plantwide overhead rate Actual use of allocation base Manufacturing overhead = allocated = $ 270 270 45 Job 450 Job 455 45 Requirement 4. If Harrison's uses departmental overhead rates, how much manufacturing overhead would be allocated to Job 450 and Job 455? Use the following table to calculate the amount of manufacturing overhead that would be allocated to the jobs if the departmental overhead rates are used. (Round your answers to the nearest whole dollar.) Job 450 Job 455 Machining $ 147 125 196 100 Finishing 272 $ 296 Total overhead allocation Requirement 5. Based on your answers to Requirements 3 and 4, does the plantwide overhead rate overcost or undercost either job? Explain. If Harrison's sells its furniture at 125% of cost, will its choice of allocation systems affect product pricing? Explain. The single plantwide rate undercosts Job 450 by $ 296 and undercosts Job 455 by $ 272
