Perreth Products manufactures its products in two separate departments, machining and assembly. Total manufacturing overhead costs for the year are budgeted at $1 million of this amount, the Machining Department incurs $600,000 (primarily for machine operation and depreciation) while the Assembly Department incurs $400,000. Perreth Products estimates it will incur 4,000 machine hours (all in the Machining Department) and 12 500 direct labour hours (2,500 in the Machining Department and 10,000 in the Assembly Department) during the year. Perreth Products currently uses a plantwide overhead rate based on direct labour hours to allocate overhead. However, the company is considering refining its overhead allocation system by using departmental overhead rates. The Machining Department would allocate its overhead using machine hours (MH), but the Assembly Department would allocate its overhead using direct labour (DL) hours. The following chart shows the machine hours (MH) and direct labour (DL) hours incurred by Jobs 500 and 501 in each production department B (Click the icon to view the machine hours and direct labour hours incurred by each department.) Job 500 Job 501 2717 2717 Sales price Less Total manufacturing costs: Direct materials 1000 1000 Enter any number in the edit fields and then click Check Answer ? 1 part Clear All Check Answer remaining Question Help estimates it will incur 4,000 machine hours (all in the Machining Department) and 12,500 direct labour hours (2,500 in the Machining Department and 10,000 in the Assembly Department) during the year. Perreth Products currently uses a plantwide overhead rate based on direct labour hours to allocate overhead. However, the company is considering refining its overhead allocation system by using departmental overhead rates. The Machining Department would allocate its overhead using machine hours (MH), but the Assembly Department would allocate its overhead using direct labour (DL) hours. The following chart shows the machine hours (MH) and direct labour (DL) hours incurred by Jobs 500 and 501 in each production department: B (Click the icon to view the machine hours and direct labour hours incurred by each department.) Both Jobs 500 and 501 used $1,000 of direct materials. Wages and benefits total $25 per direct labour hour. Perreth Products prices its products at 110% of total manufacturing costs. Requirements wowy Job 500 Job 501 Sales price 2717 2717 Less: Total manufacturing costs: Direct materials 1000 1000 Enter any number in the edit fields and then click Check Answer 1 part Clear All Check Answer remaining Question Requirements 1. Compute Perreth Products' current plantwide overhead rate. 2. Compute refined departmental overhead rates. 3. Which job (Job 500 or Job 501) uses more of the company's resources? Explain. 4: Compute the total amount of overhead allocated to each job if Perreth Products uses its current plantwide overhead rate. 5. Compute the total amount of overhead allocated to each job if Perreth Products uses departmental overhead rates 6. Do both allocation systems accurately reflect the resources that each job used? Explain. 7. Compute the total manufacturing cost and sales price of each job using Perreth Products' current plantwide overhead rate 8. Based on the current (plantwide) allocation system, how much profit did Perreth Products think it earned on each job? Based on the departmental overhead rates and the sales price determined in Requirement 7 how much profit did it really earn on each job? 9. Compare and comment on the results you obtained in Requirements 7 and 8. Print Done ert inion Clear All 1 Data Table X th P d del 500 tal a Machining Department ses its head Assembly Department otal a ses dep Job 500 3 12 DL hours cions 2 DL hours xplain Iroducts Job 501 6 MH 12 DL hours otal n head curre h job hoy com 2 DL hours roducts ce deterr Print Done PTIT Done Clear All Check A Tietz/Beaubien: Managerial Accounting, Fourth Canadian Edition