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The Old Line Company uses Normal Costing. The company has one service department (M) and two production departments (P1 and P2). The service department allocates
The Old Line Company uses Normal Costing. The company has one service department (M) and two production departments (P1 and P2). The service department allocates costs to P1 and P2 using machine hours in those departments. The service department charges variable costs and fixed costs separately. Both production departments use direct labor hours to compute their predetermined overhead rates. The budgeted costs in Department M for 2020 are $112,000 Variable and $256,000 fixed. Data for the production departments for 2020 are shown below. Description Department P1 Department P2 Budgeted Machine Hours 27,000 MH 5,000 MH Maximum Machine Hours 30,000 MH 10,000 MH Budgeted Departmental OH Cost $453,500 $150,500 Budgeted Direct Labor Hours 100,000 DLH 40,000 DLH The production department overhead costs above do NOT include service cost allocations. TASK ONE: 8 points Compute the Predetermined Overhead Rate (POHR) in P1 for 2020. Please show your work to receive credit. TASK TWO: 8 points Refer to Task 1. The actual overhead incurred in Department M during 2020 was $108,000 in variable cost and $240,000 in fixed costs. There were 52,000 actual machine hours and 96,000 actual direct labor hours in Department P1 during 2020. There were 8,000 actual machine hours and 38,000 actual direct labor hours in Department P2 during 2020. The actual overhead incurred in the production departments (before service cost allocations) were $650,000 for Department P1 and $220,400 in Department P2
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