Southwick Products manufactures its products in two separate departments: Machining and Assembly. Total manufacturing overhead costs for the year are budgeted at $1,050,000. Of this amount, the Machining Department incurs $650,000 (primarily for machine operation and depreciation) while the Assembly Department incurs $400,000. The company estimates that it will incur 5,000 machine hours (all in the Machining Department) and 10,000 direct labor hours (2,000 in the Machining Department and 8,000 in the Assembly Department) during the year. (Click the icon to view the additional information.) 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. Total manufacturing overhead 1050000 Total direct labor hours 10000 Plantwide overhead rate = 105 per DL hour Requirement 2. Compute refined departmental overhead rates. Determining the formula, then compute the rates. (Round your answers to the nearest dollar.) Machining Assembly Total departmental overhead cost 650000 400000 Total departmental allocation base 5000 8000 Departmental overhead rate = 130 per mach hour = 50 per DL hour 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 Requirement 4. Compute the total amount of overhead allocated to each job if the company uses its current plantwide overhead rate. Total direct labor hours Plantwide allocation rate Overhead allocation Job 500 Job 501 the other. Requirement 5. Compute the total amount of overhead allocated to each job if the company uses departmental overhead rates. Overhead allocation - Machining Department Overhead allocation - Assembly Department Job 500 Job 501 Total overhead allocation Requirement 6. Do both of the allocation systems accurately reflect the resources each job used? Explain. The single plantwide overhead rate assigned of overhead to both jobs. The departmental rates assign to Job 501 than Job 500 due to the used. This seems Requirement 7. Compute the total manufacturing cost and sales price of each job using the company's current plantwide overhead rate. (Round amounts to the nearest dollar. Enter the percentage as a whole number.) Direct materials Direct labor Manufacturing overhead Total manufacturing costs Markup for pricing (%) Sales price Job 500 Job 501 % % Requirement 8. Based on the current (plantwide) allocation system, how much profit did the company think it earned on each job? Calculate the gross profit using the current costing system. Sales price Job 500 Job 501 Less: Total manufacturing costs Gross profit (loss) Based on the departmental overhead rates and the sales price determined in Requirement 7, how much profit did the company really earn on each job? Calculate the gross profit using the departmental rate costing system. (Use parentheses or a minus sign to show losses.) Calculate the gross profit using the departmental rate costing system. (Use parentheses or a minus sign to show losses.) Sales price Less: Total manufacturing costs: Direct materials Direct labor Manufacturing overhead Gross profit (loss) Job 500 Job 501 Requirement 9. Compare and comment on the results you obtained in Requirements 7 and 8. When utilizing a single rate allocation method, Southwick believes that When utilizing a refined costing method, Southwick realizes that