Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate based on machine hours is used. Xania's plant manager has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Xania has the following data for its two departments for the coming year:

	Department A	Department B
Overhead costs (expected)	$750,000	$330,000
Normal activity (machine hours)	6,000	10,000
Normal activity (direct labor hours)	2,000	1,000

1. Compute a predetermined overhead rate for the plant as a whole based on machine hours.

2. Compute predetermined overhead rates for each department using machine hours for Department A and direct labor hours for Department B. (Note: Carry your calculations out to the nearest dollar.)

3. Job 73 was composed of 1,000 units; it has $5,000 of prime costs and used 25 machine hours from Department A and 50 machine hours from Department B; it used 30 direct labor hours from Department A and 20 direct labor hours from Department B. Job 74 was composed of 1,200 units; it has $6,000 of prime costs and used 40 machine hours from Department A and 15 machine hours from Department B; it used 20 direct labor hours from Department A and 50 direct labor hours from Department B. Compute the cost per unit from Job 73 and Job 74 using a plant-wide Overhead rate; then compute the cost per unit for Job 73 and Job 74 using a departmental Overhead rate.

Be sure to show work (hint: dont forget when computing cost per unit to include all manufacturing costs; hint 2: find the total cost of the job under one method, and then divide by number made to find cost/unit; repeat for the different parts).

Job 73 Plantwide	Job 73 Departmental
Job 74 Plantwide	Job 74 Departmental

4. Using a Plantwide, if actual machine hours for the year were 17,000 hours and actual overhead costs were $1,050,000, how much was overhead under- or over-applied for the year and how would that affect Cost of Goods Sold when it is closed to that account.

$$_________________________ over-applied/under-applied (circle one)

$$_________________________ Cost of Goods Sold increased/decreased (circle one)