Problem 17-28 Service Department Cost Allocation; Plantwide versus Departmental Overhead Rates; Cost Drivers (LO 17-1, 17-2, 17-3)

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[The following information applies to the questions displayed below.] Travelcraft Company manufactures a complete line of fiberglass suitcases and attach cases. The firm has three manufacturing departments: Molding, Component, and Assembly. There are also two service departments: Power and Maintenance. The sides of the cases are manufactured in the Molding Department. The frames, hinges, and locks are manufactured in the Component Department. The cases are completed in the Assembly Department. Varying amounts of materials, time, and effort are required for each of the cases. The Power Department and Maintenance Department provide services to the three manufacturing departments. Travelcraft has always used a plantwide overhead rate. Direct-labor hours are used to assign overhead to products. The predetermined overhead rate is calculated by dividing the companys total estimated overhead by the total estimated direct-labor hours to be worked in the three manufacturing departments. Karen Mason, director of cost management, has recommended that Travelcraft use departmental overhead rates. The planned operating costs and expected levels of activity for the coming year have been developed by Mason and are presented by department in the following schedules. (All numbers are in thousands.)

	Service Departments
	Power		Maintenance
Departmental activity measures:
Maximum capacity		900	kilowatt hours		Adjustable
Estimated usage for the coming year		880	kilowatt hours		150	hours
Departmental costs:
Materials and supplies			$	6,000				$	1,500
Variable labor				2,800					4,300
Fixed overhead				23,400					200
Total service department costs			$	32,200				$	6,000

	Manufacturing Departments
	Molding		Component		Assembly
Department activity measures:
Direct-labor hours		800				2,900				2,300
Machine hours		925				150				0
Departmental costs:
Direct material	$	13,400			$	34,000			$	1,280
Direct labor		4,600				24,000				13,000
Variable overhead		3,900				14,000				18,100
Fixed overhead		17,600				7,100				7,000
Total departmental costs	$	39,500			$	79,100			$	39,380
Use of service departments:
Maintenance:
Estimated usage in labor hours for the coming year		100				30				20
Power (in kilowatt-hours):
Estimated usage for the coming year		350				380				150
Maximum allotted capacity		400				300				200

Problem 17-28 Part 1

Required: 1. Calculate the plantwide overhead rate for Travelcraft Company for the coming year using the same method as used in the past. (Round your answer to 2 decimal places.)

2. Karen Mason has been asked to develop departmental overhead rates for comparison with the plantwide rate. The following steps are to be followed in developing the departmental rates. a. The Maintenance Department costs should be allocated to the three manufacturing departments using the direct method. b. The Power Department costs should be allocated to the three manufacturing departments using dual cost allocation combined with the direct method of service department cost allocation. Fixed costs are to be allocated according to maximum allotted capacity, and variable costs are to be allocated according to planned usage for the coming year. c. Calculate departmental overhead rates for the three manufacturing departments using a machine-hour cost driver for the Molding Department and a direct-labor-hour cost driver for the Component and Assembly departments. (Do not round intermediate calculations. Enter all your answers in thousands except "Departmental overhead rate" which should be entered in dollars rounded to 2 decimal places.)