Please answer REQUIREMENTS 5.
1. Jameson's Fine Furnishings manufactures upscale custom furniture. Jameson's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,000,000 of manufacturing overhead to individual jobs. However, Diana Isaacs, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $660,000 of manufacturing overhead while the Finishing Department incurs $340,000 of manufacturing overhead. Isaacs 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. 1(Click the icon to view the job information.) Read the requirements. Requirement 1. Compute the plantwide overhead rate assuming that Jameson's expects to incur 20,000 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 $ 1,000,000 20,000 $ 50 Requirement 2. Compute departmental overhead rates assuming that Jameson's expects to incur 15,000 MH in the Machining Department and 17,000 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 overhead rate Cost allocation base (estimated) 15,000 Machining Total department overhead 660,000 340,000 $ = $ 44 per mach. hour Finishing $ 17,000 $ 20 per DL hour Requirement 3. If Jameson'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 Plantwide overhead rate X Actual use of allocation base = allocated Job 450 50 6 $ 300 Job 455 50 6 $ 300 Requirement 4. If Jameson's uses departmental overhead rates, how much manufacturing overhead would be allocated to Job 450 and Job 455? PE 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 $ 88 $ 176 100 80 Finishing $ 188 $ 256 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 Jameson's sells its furniture at 125% of cost, will its choice of allocation systems affect product pricing? Explain. (1) undercosts (2) undercosts The single plantwide rate Job 450 by 112 and Job 455 by 44 Since Jameson's sets its sales price at 125% of cost, and the job cost is (3) by the allocation system it uses, its sales price will (4) by the allocation system it uses. 1: More Info The Jameson's plant completed Jobs 450 and 455 on May 15. Both jobs incurred a total of 6 DL hours throughout the entire production process. Job 450 incurred 2 MH in the Machining Department and 5 DL hours in the Finishing Department (the other DL hour occurred in the Machining Department). Job 455 incurred 4 MH in the Machining Department and 4 DL hours in the Finishing Department (the other two DL hours occurred in the Machining Department). 2: Requirements 1. Compute the plantwide overhead rate assuming that Jameson's expects to incur 20,000 total DL hours during the year. 2. Compute departmental overhead rates assuming that Jameson's expects to incur 15,000 MH in the Machining Department and 17,000 DL hours in the Finishing Department during the year. 3. If Jameson's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455? 4. If Jameson'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 Jameson's sells its furniture at 125% of cost, will its choice of allocation systems affect product pricing? Explain. (1) (2) (3) (4) affected not affected be affected not be affected O overcosts O undercosts
