Vernon makes handheld calculators in two modelsbasic and professional. Vernon estimated $1,149,500 of manufacturing overhead and 605,000 machine hours for the year. The basic model actually consumed 280,000 machine hours, and the professional model consumed 325,000 machine hours. The predetermined overhead allocation rate using machine hours as the allocation base is $1.90 per machine hour, with the allocated overhead costs split between the basic model and the professional model by $532,000 and $617,500, respectively. (Click the icon to view the data using multiple department allocation rates.) (Click the icon to view additional data.) Read the requirements. Requirement 1. Vernon expects to produce 175,000 basic models and 175,000 professional models. Compute the predetermined overhead allocation rates using activity-based costing. How much overhead is allocated to the basic model? To the professional model? Begin by selecting the formula to calculate the predetermined overhead (OH) allocation rate. Then enter the amounts to compute the allocation rate for each activity. (Abbreviation used: Qty = quantity. Enter the materials handling allocation rate to four decimal places, and the remaining allocation rates to the nearest cent.) Predetermined OH Estimated overhead costs . Estimated qty of the allocation base allocation rate Materials Handling $ 63,000 . 15,750,000 = 0.0040 Machine Setup $ 456,500 55 = $ 8,300.00 Insertion of Parts $ 630,000 15,750,000 $ 0.04 How much overhead is allocated to the basic model? To the professional model? Begin by selecting the formula to allocate overhead (OH) costs. (Abbreviation used: Qty = quantity.) Predetermined OH allocation rate Actual qty of the allocation base used - Allocated mfg. overhead costs Compute the total overhead allocated to the basic model, and then compute the total overhead allocated to the professional model. Basic Model Professional Model $ Manufacturing overheadMaterials Handling Manufacturing overheadMachine setup 21,000 $ 166,000 42,000 290,500 420,000 Manufacturing overheadInsertion of Parts 210,000 $ 397,000 $ 752,500 Total manufacturing overhead cost Requirement 2. Compare the activity-based costing results from Requirement 1 with the company's results using a single plantwide rate and using multiple department rates. What conclusions can you draw? Begin by completing the table below to show the total and per unit overhead allocated to each model under each of the three different allocation methods. (Round per unit amounts to the nearest cent.) Basic Model Professional Model Total MOH Per Unit Total MOH Per Unit Single plantwide allocation rate Multiple department allocation rates Activity-based allocation rates More Info Data Table Vernon wants to further refine its costing system by allocating overhead using activity-based costing. The estimated $1,149,500 of manufacturing overhead has been divided into three primary activities: Materials Handling, Machine Setup, and Insertion of Parts. The following data have been compiled: Basic Model Professional Model Manufacturing overhead-Assembly $ 430,100 $ 76,000 229,900 413,500 Materials Handling Machine Setup Insertion of Parts Total Manufacturing overhead-Packaging Overhead costs $63,000 $456,500 $630,000 $ 1,149,500 $ 506,100 $ 643,400 Total manufacturing overhead cost Allocation Base Number of parts Number of setups Number of parts Expected usage: Basic Model 30 parts per calculator 30 parts per calculator 20 setups per year 60 parts per calculator 35 setups per year Print Done Professional Model 60 parts per calculator
