Question
RobillardRobillard Products manufactures its products in two separate? departments: Machining and Assembly. Total manufacturing overhead costs for the year are budgeted at $ 1 comma
RobillardRobillard
Products manufactures its products in two separate? departments: Machining and Assembly. Total manufacturing overhead costs for the year are budgeted at
$ 1 comma 058 comma 000$1,058,000.
Of this? amount, the Machining Department incurs
$ 610 comma 000$610,000
?(primarily for machine operation and? depreciation) while the Assembly Department incurs
$ 448 comma 000$448,000.
The company estimates that it will incur
12 comma 20012,200
machine hours? (all in the Machining? Department) and
21 comma 16021,160
direct labor hours
?(5 comma 1605,160
in the Machining Department and
16 comma 00016,000
in the Assembly? Department) during the year.
RobillardRobillard
Products currently uses a plantwide overhead rate based on direct labor 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 labor? (DL) hours. The following chart shows the machine hours? (MH) and direct labor? (DL) hours incurred by Jobs 500 and 501 in each production? department:
1. | Compute the? company's 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 the company uses its current plantwide overhead rate. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5. | Compute the total amount of overhead allocated to each job if the company 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 the? company's current plantwide overhead rate. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8. | Based on the current? (plantwide) allocation? system, how much profit did the company 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. Requirement 1. Compute the? company's current plantwide overhead rate. ?(Round your answer to the nearest? dollar.) Begin by determining the? formula, then compute the rate.
Requirement 2. Compute refined departmental overhead rates. Determining the? formula, then compute the rates. ?(Round your answers to the nearest? dollar.)
Requirement 3. Which job? (Job 500 or Job? 501) uses more of the? company's resources? Explain. Job 501 uses more of the? company's resources. Job 501 uses more machine hours than the other job. The accounting system should show that one job actually "costs" the company more resources than the other. Requirement 4. Compute the total amount of overhead allocated to each job if the company uses its current plantwide overhead rate.
Requirement 5. Compute the total amount of overhead allocated to each job if the company uses departmental overhead rates.
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