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Required information Hobart Company manufactures attach cases and suitcases. It has five manufacturing departments. The Molding, Component, and Assembly departments convert raw materials into finished goods; hence, they are treated as operating departments. The Power and Maintenance departments are treated as service departments because they support the three operating departments. Hobart has always used a plantwide predetermined overhead rate with direct labor-hours as the allocation base for product costing purposes. The overhead rate is computed by dividing the company's total estimated overhead cost (across the five manufacturing departments) by the total estimated direct labor-hours to be worked in the three operating departments. The company has been experiencing declining profits; therefore, it is considering switching from plantwide overhead allocation to a departmental approach. Under the departmental approach, the service department costs would be allocated to the three operating departments. Then each operating department would compute its own overhead rate. The overhead rate in Molding would be based on machine-hours and the rates in Component and Assembly would be based on direct labor-hours. The service departments' estimated costs for the coming year are as follows: Variable overhead cost Fixed overhead cost Total overhead cost Service Departments Power Maintenance $ 640,000 $ 25,000 1,200,000 375,000 $1,840,000 $ 400,000 The Power Department would allocate its variable costs to the operating departments based on estimated kilowatt hours used and it would allocate its fixed costs based on the percentage of peak-period capacity required. The Maintenance Department would allocate its variable costs to the operating departments based on estimated maintenance hours used and it would allocate its fixed costs based on the percentage of peak-period capacity required. The corresponding data for allocating service department costs to operating departments are as follows: The Power Department would allocate its variable costs to the operating departments based on estimated kilowatt hours used and it would allocate its fixed costs based on the percentage of peak-period capacity required. The Maintenance Department would allocate its variable costs to the operating departments based on estimated maintenance hours used and it would allocate its fixed costs based on the percentage of peak-period capacity required. The corresponding data for allocating service department costs to operating departments are as follows: Molding Operating Departments Component Assembly 36,000 50% 32,000 35% 12,000 15% Power department: Estimated kilowatt hours used Percentage of peak-period capacity Maintenance Department: Estimated maintenance hours used Percentage of peak-period capacity 9,000 70% 2,500 20% 1,000 10% The company also provided the following estimated data for its three operating departments: Operating Departments Molding Component Assembly Departmental costs: Direct materials Direct labor Manufacturing overhead Total departmental costs Allocation bases: Direct labor-hours Machine-hours $1,630,000 $3,000,000 350,000 2,000,000 1,960,500 1,620,000 $3,940,500 $6,620,000 $ 25,000 1,300,000 2,399,500 $3,724,500 50,000 87,500 200,000 12,500 150,000 a Required: 1. Compute the company's predetermined plantwide overhead rate. 2. Assume the company decides to use departmental overhead rates. a. Using the direct method, allocate the variable and fixed service department costs to the operating departments. b. Calculate the predetermined departmental overhead rates for each of the three operating departments. 3. One of Hobart's products is a small attach case that uses the following machine-hours and direct labor-hours in the three operating departments: Molding Department Component Department Assembly Department Total hours Machine- Hours 3,000 800 0 3,800 Direct Labor- Hours 1,000 2,500 4,000 7,500 a. Calculate the amount of overhead that would be applied to this attach case using the plantwide approach. b. Calculate the amount of overhead that would be applied to this attach case using the departmental approach. 4a. Is the plantwide approach overcosting or undercosting the attach case compared to the departmental approach? Complete this question by entering your answers in the tabs below. Req 1 Req 2a Reg 2b Req 3a Reg 3b Req 4a Assume the company decides to use departmental overhead rates. Using the direct method, allocate the variable and fixed service department costs to the operating departments. Component Department Assembly Department Total variable costs Total fixed costs Total allocated costs Power Maintenance Molding Department Department Department $ 18,000 $ 256,000 $ 1,168,500 $ 600,000 $ 1,168,500 Molding Department Component Department Assembly Department Total hours Machine- Hours 3,000 800 0 3,800 Direct Labor- Hours 1,000 2,500 4,000 7,500 a. Calculate the amount of overhead that would be applied to this attach case using the plantwide approach. b. Calculate the amount of overhead that would be applied to this attach case using the departmental approach. 4a. Is the plantwide approach overcosting or undercosting the attach case compared to the departmental approach? Complete this question by entering your answers in the tabs below. Req 1 Req 2a Req 2b Reg Req3b Req 4a Assume the company decides to use departmental overhead rates. Calculate the predetermined departmental overhead rates for each of the three operating departments. (Round your final answers to 2 decimal places.) Molding Component Assembly Department Department Department $ 35.76 $ 11.88 $ 18.10 Predetermined departmental overhead rate Machine- Hours 3,000 800 Molding Department Component Department Assembly Department Total hours Direct Labor- Hours 1,000 2,500 4,000 7,500 3,800 a. Calculate the amount of overhead that would be applied to this attach case using the plantwide approach. b. Calculate the amount of overhead that would be applied to this attach case using the departmental approach. 4a. Is the plantwide approach overcosting or undercosting the attach case compared to the departmental approach? Complete this question by entering your answers in the tabs below. Req 1 Req 2a Req 2b Req 3a Req 36 Req 4a Calculate the amount of overhead that would be applied to the attach case using the plantwide approach. (Round your intermediate calculations to 2 decimal places.) Applied overhead $ 8,220,000 Machine- Hours 3,000 800 Molding Department Component Department Assembly Department Total hours Labor- Hours 1,000 2,500 4,000 7,500 3,800 a. Calculate the amount of overhead that would be applied to this attach case using the plantwide approach. b. Calculate the amount of overhead that would be applied to this attach case using the departmental approach. 4a. Is the plantwide approach overcosting or undercosting the attach case compared to the departmental approach? Complete this question by entering your answers in the tabs below. Req 1 Req 2a Reg 2b Req 3a Req 3b Req 4a Calculate the amount of overhead that would be applied to the attach case using the departmental approach. (Round your intermediate calculations to 2 decimal places.) Molding department Component department Assembly department Overhead allocated Machine- Hours 3,000 800 Molding Department Component Department Assembly Department Total hours Direct Labor- Hours 1,000 2,500 4,000 7,500 3,800 a. Calculate the amount of overhead that would be applied to this attach case using the plantwide approach. b. Calculate the amount of overhead that would be applied to this attach case using the departmental approach. 4a. Is the plantwide approach overcosting or undercosting the attach case compared to the departmental approach? Complete this question by entering your answers in the tabs below. Req 1 Req 2a Req 2b Req 3a Reg 3b Req 4a Is the plantwide approach overcosting or undercosting the attach case compared to the departmental approach? The plantwide approach is undercosting the attach case. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Req 2a Req 2b Reg Req 3b Req 4a Calculate the amount of overhead that would be applied to the attach case using the plantwide approach. (Round your intermediate calculations to 2 decimal places.) Applied overhead $ 8,220,000 Complete this question by entering your answers in the tabs below. Reg 1 Reg 2a Req 2b Req 3a Reg 3b Reg 4a Calculate the amount of overhead that would be applied to the attach case using the departmental approach. (Round your intermediate calculations to 2 decimal places.) Molding department Component department Assembly department Overhead allocated
