Lenko Products Case Study

Assuming the use of a plantwide overhead rate:
a. Compute the rate for the current year. (Show your work for credit; 2 points)

Cutting Machining Assembly Total Plant
Direct Labor $300,000.00 $200,000.00 $400,000.00 $900,000.00
Mfg Overhead $540,000.00 $800,000.00 $100,000.00 $1,440,000.00
1a) Plantwide O/H Rate 1,440,000/900000 1.60

b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job.(show your work, 2 points)
Direct Materials $12,000.00 $900.00 $5,600.00 $18,500.00
Direct Labor $6,500.00 $1,700.00 $13,000.00 $21,200.00 6500*1.60 1700*1.60 13000*1.60 21200*1.60
1b) Mfg Overhead $10,400.00 $2,720.00 $20,800.00 $33,920.00 $73,620.00

2. Suppose that instead of using a plantwide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions:
a. Compute the rate for each department for the current year. (Show a table with each department and the calculated overhead rate for the department, 3 points) Cutting Machining Assembly
Direct Labor $300,000.00 $200,000.00 $400,000.00
Mfg Overhead $540,000.00 $800,000.00 $100,000.00 540000/300000 800000/200000 100000/400000
Departmental Mfg O/H Rate 1.80 4.00 0.25
b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. (show work, 2 points)
PROPOSED Cutting Machining Assembly Total
Direct Materials $12,000.00 $900.00 $5,600.00 $18,500.00
Direct Labor $6,500.00 $1,700.00 $13,000.00 $21,200.00 6500*1.80 1700*4.00 13000*.25
Mfg Overhead $11,700.00 $6,800.00 $3,250.00 $21,750.00 $61,450.00
3. Explain the difference between the manufacturing overhead that would have been applied to the Hastings job using the plantwide rate in question 1(b) and using