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.
a. Predetermined Overhead rate=

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%
Manufacturing Overhead
(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...
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