A Corporation has two manufacturing departments (Dept 1 and Dept 2). The company used the following data at the beginning of the period to calculate a predetermined overhead rate. Estimated total machine-hours (MHs) Estimated total direct labor hours (DLHs) Estimated total fixed manufacturing overhead cost Dept 1 5,000 3,000 $ 18,000 Dept 2 8,000 1,700 $ 14,000 $ 5.25/MH Estimated variable manufacturing overhead $9.10/MH cost per machine hour Estimated variable manufacturing overhead S 8.20/DLH $ 20.00/DLH cost per direct labor hour Total 13,000 4,700 $ 32,000 a) Assume that the company decides to use a plantwide predetermined overhead rate based on direct labor hours. Calculate the plantwide predetermined overhead rate. b) Assume that the company also calculated a plantwide predetermined overhead rate based on machine hours. Calculate the plantwide predetermined overhead rate.

A Corporation has two manufacturing departments (Dept 1 and Dept 2). The company used the following data at the beginning of the period to calculate a predetermined overhead rate. Estimated total machine-hours (MHs) Estimated total direct labor hours (DLHs) Estimated total fixed manufacturing overhead cost Dept 1 5,000 3,000 $ 18,000 Dept 2 8,000 1,700 $ 14,000 $ 5.25/MH Estimated variable manufacturing overhead $9.10/MH cost per machine hour Estimated variable manufacturing overhead S 8.20/DLH $ 20.00/DLH cost per direct labor hour Total 13,000 4,700 $ 32,000 a) Assume that the company decides to use a plantwide predetermined overhead rate based on direct labor hours. Calculate the plantwide predetermined overhead rate. b) Assume that the company also calculated a plantwide predetermined overhead rate based on machine hours. Calculate the plantwide predetermined overhead rate.

Name: Problem 3A Corporation has two manufacturing departments (Dept 1 and
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Description: Problem 3A Corporation has two manufacturing departments (Dept 1 and Dept 2). The company used thefollowing data at the beginning of the period to calculate a predetermined overhead rate.Estimated total machine-hours (MHs)Estimated total direct labo

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Variance Analysis

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.

Standard Costing

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.

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Problem 3
A Corporation has two manufacturing departments (Dept 1 and Dept 2). The company used the
following data at the beginning of the period to calculate a predetermined overhead rate.
Estimated total machine-hours (MHs)
Estimated total direct labor hours (DLHs)
Estimated total fixed manufacturing
overhead cost
Dept 1
5,000
3,000
$ 18,000
Estimated variable manufacturing overhead $ 9.10/MH
cost per machine hour
Estimated variable manufacturing overhead S 8.20/DLH
cost per direct labor hour
Dept 2
8,000
1,700
$ 14,000
$ 5.25/MH
$ 20.00/DLH
Total
13,000
4,700
$ 32,000
a) Assume that the company decides to use a plantwide predetermined overhead rate based
on direct labor hours. Calculate the plantwide predetermined overhead rate.
b) Assume that the company also calculated a plantwide predetermined overhead rate based
on machine hours. Calculate the plantwide predetermined overhead rate.

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