Case3-29 Plantwide Versus Departmental Overhead Rates

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%) Cutting Machining Assembly $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