Rooney Manufacturing Company uses two departments to make its products. Department I is a cutting department that is machine intensive and uses very few employees. Machines cut and form parts and then place the finished parts on a conveyor belt that carries them to Department II, where they are assembled into finished goods. The assembly department is labor intensive and requires many workers to assemble parts into finished goods. The companys manufacturing facility incurs two significant overhead costs: employee fringe benefits and utility costs. The annual costs of fringe benefits are $300,000 and utility costs are $228,000. The typical consumption patterns for the two departments are as follows: Department I Department II Total Machine hours used 14,800 5,200 20,000 Direct labor hours used 6,200 9,800 16,000 The supervisor of each department receives a bonus based on how well the department controls costs. The companys current policy requires using a single allocation base (machine hours or labor hours) to allocate the total overhead cost of $528,000. Required Assume that you are the supervisor of Department I. Choose the allocation base that would minimize your departments share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. Assume that you are the supervisor of Department II. Choose the allocation base that would minimize your departments share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. Assume that you are the plant manager and have the authority to change the companys overhead allocation policy. Formulate an overhead allocation policy that would be fair to the supervisors of both Department I and Department II. Compute the overhead allocations for each department using your policy.

Rooney Manufacturing Company uses two departments to make its products. Department I is a cutting department that is machine intensive and uses very few employees. Machines cut and form parts and then place the finished parts on a conveyor belt that carries them to Department II, where they are assembled into finished goods. The assembly department is labor intensive and requires many workers to assemble parts into finished goods. The company's manufacturing facility incurs two significant overhead costs: employee fringe benefits and utility costs. The annual costs of fringe benefits are $300,000 and utility costs are $228,000. The typical consumption patterns for the two departments are as follows: The supervisor of each department receives a bonus based on how well the department controls costs. The company's current policy requires using a single allocation base (machine hours or labor hours) to allocate the total overhead cost of $528,000. Required a. Assume that you are the supervisor of Department I. Choose the allocation base that would minimize your department's share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. b. Assume that you are the supervisor of Department II. Choose the allocation base that would minimize your department's share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. c. Assume that you are the plant manager and have the authority to change the company's overhead allocation policy. Formulate an overhead allocation policy that would be fair to the supervisors of both Department I and Department II. Compute the overhead allocations for each department using your policy. Complete this question by entering your answers in the tabs below. Assume that you are the supervisor of Department I. Choose the allocation base that would minimize your department's share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. (Do not round intermediate calculations.) Complete this question by entering your answers in the tabs below. Assume that you are the supervisor of Department II. Choose the allocation base that would minimize your department's share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. (Do not round intermediate calculations.) Complete this question by entering your answers in the tabs below. Assume that you are the plant manager and have the authority to change the company's overhead allocation policy. Formulate an overhead allocation policy that would be fair to the supervisors of both Department I and Department II. Compute the overhead allocations for each department using your policy. (Do not round intermediate calculations.)

Question

Rooney Manufacturing Company uses two departments to make its products. Department I is a cutting department that is machine intensive and uses very few employees. Machines cut and form parts and then place the finished parts on a conveyor belt that carries them to Department II, where they are assembled into finished goods. The assembly department is labor intensive and requires many workers to assemble parts into finished goods. The companys manufacturing facility incurs two significant overhead costs: employee fringe benefits and utility costs. The annual costs of fringe benefits are $300,000 and utility costs are $228,000. The typical consumption patterns for the two departments are as follows: Department I Department II Total Machine hours used 14,800 5,200 20,000 Direct labor hours used 6,200 9,800 16,000 The supervisor of each department receives a bonus based on how well the department controls costs. The companys current policy requires using a single allocation base (machine hours or labor hours) to allocate the total overhead cost of $528,000. Required Assume that you are the supervisor of Department I. Choose the allocation base that would minimize your departments share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. Assume that you are the supervisor of Department II. Choose the allocation base that would minimize your departments share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. Assume that you are the plant manager and have the authority to change the companys overhead allocation policy. Formulate an overhead allocation policy that would be fair to the supervisors of both Department I and Department II. Compute the overhead allocations for each department using your policy.

image text in transcribed

Rooney Manufacturing Company uses two departments to make its products. Department I is a cutting department that is machine intensive and uses very few employees. Machines cut and form parts and then place the finished parts on a conveyor belt that carries them to Department II, where they are assembled into finished goods. The assembly department is labor intensive and requires many workers to assemble parts into finished goods. The company's manufacturing facility incurs two significant overhead costs: employee fringe benefits and utility costs. The annual costs of fringe benefits are $300,000 and utility costs are $228,000. The typical consumption patterns for the two departments are as follows: The supervisor of each department receives a bonus based on how well the department controls costs. The company's current policy requires using a single allocation base (machine hours or labor hours) to allocate the total overhead cost of $528,000. Required a. Assume that you are the supervisor of Department I. Choose the allocation base that would minimize your department's share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. b. Assume that you are the supervisor of Department II. Choose the allocation base that would minimize your department's share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. c. Assume that you are the plant manager and have the authority to change the company's overhead allocation policy. Formulate an overhead allocation policy that would be fair to the supervisors of both Department I and Department II. Compute the overhead allocations for each department using your policy. Complete this question by entering your answers in the tabs below. Assume that you are the supervisor of Department I. Choose the allocation base that would minimize your department's share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. (Do not round intermediate calculations.) Complete this question by entering your answers in the tabs below. Assume that you are the supervisor of Department II. Choose the allocation base that would minimize your department's share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. (Do not round intermediate calculations.) Complete this question by entering your answers in the tabs below. Assume that you are the plant manager and have the authority to change the company's overhead allocation policy. Formulate an overhead allocation policy that would be fair to the supervisors of both Department I and Department II. Compute the overhead allocations for each department using your policy. (Do not round intermediate calculations.)