# Case3-29 Plantwide Versus Departmental Overhead Rates

Topics: Cost, Costs, Price Pages: 3 (482 words) Published: March 2, 2013
Case 3-29 Plantwide versus Departmental Overhead Rates; Underapplied or Overapplied Overhead 1.

Estimated total manufacturing overhead costs Estimated total amount of allocation base|

= \$1,440,000 = 160% of direct labor costs \$900,000 direct labor costs |

b. Hastings Job Direct Labor -Allocation Base × Plantwide Overhead Rate (160%)

CuttingMachiningAssembly
\$6500 \$1700 \$13,000 Plantwide Overhead Rate…… 160% 160% 160% Manufacturing overhead…….. \$10,400 \$2720 \$20,800

Total manufacturing overhead cost for Hastings Job= \$10,400 + \$2,720 + \$20,800 = \$33,920

2. Cutting Machining Assembly
a. Department Department Department Direct Labor (b)………. \$300,000 \$200,000 \$400,000 Manufacturing Overhead (a) \$540,000 \$800,000 \$100,000 Predetermined Overhead

Rate ( a ÷ b )……………. 180% 400% 25%

b. Cutting Machining Assembly
Department Department Department Direct Labor (a)……….. \$6,500\$1,700 \$13,000 Predetermined Overhead
Rate (b)………….. 180% 400%25%
(a × b)……………..\$11,700\$6,800 \$3,250 Total = \$11,700 + \$6,800 + \$3,250
= \$21,750

3. By allocating a standard rate across all departments the Hastings job incurs manufacturing overhead costs that are greater than the product needs to be produced. By analyzing the numbers above you can see...