Bergeron's Fine Furnishings manufactures upscale custom furniture. Bergeron's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,450,000 of manufacturing overhead to individual jobs. However, Donna Donaldson, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $730,000 of manufacturing overhead while the Finishing Department incurs $720,000 of manufacturing overhead. Donaldson has identified machine hours (MH) as the primary manufacturing overhead cost driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing Department.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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owner and​ CEO, is considering refining the​ company's costing system by using departmental overhead rates.​ Currently, the Machining Department incurs

attache in ss below
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More info
The Bergeron's plant completed Jobs 450 and 455 on May 15. Both jobs
incurred a total of 7 DL hours throughout the entire production process. Job 450
incurred 2 MH in the Machining Department and 6 DL hours in the Finishing
Department (the other DL hour occurred in the Machining Department). Job 455
incurred 6 MH in the Machining Department and 5 DL hours in the Finishing
Department (the other two DL hours occurred in the Machining Department).
Print
Done
X
Requirements
1. Compute the plantwide overhead rate assuming that Bergeron's expects to incur 25,000 total DL
hours during the year.
2. Compute departmental overhead rates assuming that Bergeron's expects to incur 14,800 MH in
the Machining Department and 18,000 DL hours in the Finishing Department during the year.
3. If Bergeron's continues to use the plantwide overhead rate, how much manufacturing overhead
would be allocated to Job 450 and Job 455?
4. If Bergeron's uses departmental overhead rates, how much manufacturing overhead would be
allocated to Job 450 and Job 455?
5. Based on your answers to Requirements 3 and 4, does the plantwide overhead rate overcost or
undercost either job? Explain. If Bergeron's sells its furniture at 125% of cost, will its choice of
allocation systems affect product pricing? Explain.
X
Transcribed Image Text:More info The Bergeron's plant completed Jobs 450 and 455 on May 15. Both jobs incurred a total of 7 DL hours throughout the entire production process. Job 450 incurred 2 MH in the Machining Department and 6 DL hours in the Finishing Department (the other DL hour occurred in the Machining Department). Job 455 incurred 6 MH in the Machining Department and 5 DL hours in the Finishing Department (the other two DL hours occurred in the Machining Department). Print Done X Requirements 1. Compute the plantwide overhead rate assuming that Bergeron's expects to incur 25,000 total DL hours during the year. 2. Compute departmental overhead rates assuming that Bergeron's expects to incur 14,800 MH in the Machining Department and 18,000 DL hours in the Finishing Department during the year. 3. If Bergeron's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455? 4. If Bergeron's uses departmental overhead rates, how much manufacturing overhead would be allocated to Job 450 and Job 455? 5. Based on your answers to Requirements 3 and 4, does the plantwide overhead rate overcost or undercost either job? Explain. If Bergeron's sells its furniture at 125% of cost, will its choice of allocation systems affect product pricing? Explain. X
Bergeron's Fine Furnishings manufactures upscale custom furniture. Bergeron's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,450,000 of manufacturing overhead to individual jobs. However, Donna Donaldson, owner and CEO, is considering refining
the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $730,000 of manufacturing
manufacturing overhead
t driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing De overhead while the Finishing Department incurs $720,000 of manufacturing overhead. Donaldson has identified machine hours (MH) as the primary
(Click the icon to view the job information.)
Read the equirement
First identify the formula, then compute the rate. (Round your answer to the nearest whole dollar.)
Total manufacturing overhead
Cost allocation base (estimated)
+
25,000
1,450,000
S
Machining
Finishing
Requirement 2. Compute departmental overhead rates assuming that Bergeron's expects to incur 14,800 MH in the Machining Department and 16,000 DL hours in the Finishing Department during the year.
First identify the formula, then compute the rate for each department. (Round your answers to the nearest whole dollar.)
$
$
Job 450
Job 455
Total department overhead
730,000
720,000
+
Plantwide overhead rate
58
58
Machining
Finishing
Total overhead allocation
= Plantwide overhead rate
= $
58
Cost allocation base (estimated)
14,600
16,000
X
X
Requirement 3. If Bergeron's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455?
First identify the formula, then calculate the amount of manufacturing overhead that would be allocated to the jobs if the plantwide overhead rate is used. (Round your answers to the nearest whole dollar.)
Manufacturing overhead
=
Actual use of allocation base
7
7
= $ 50
S
= $ 45
Departmental
overhead rate
=
= S
=
S
per mach. hour
per DL hour
C
allocated
406
406
Requirement 4. If Bergeron's uses departmental overhead rates, how much manufacturing overhead would be allocated to Job 450 and Job 455?
Use the following table to calculate the amount of manufacturing overhead that would be allocated to the jobs if the departmental overhead rates are used. (Round your answers to the nearest whole dollar.)
Job 455
Job 450
Transcribed Image Text:Bergeron's Fine Furnishings manufactures upscale custom furniture. Bergeron's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,450,000 of manufacturing overhead to individual jobs. However, Donna Donaldson, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $730,000 of manufacturing manufacturing overhead t driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing De overhead while the Finishing Department incurs $720,000 of manufacturing overhead. Donaldson has identified machine hours (MH) as the primary (Click the icon to view the job information.) Read the equirement First identify the formula, then compute the rate. (Round your answer to the nearest whole dollar.) Total manufacturing overhead Cost allocation base (estimated) + 25,000 1,450,000 S Machining Finishing Requirement 2. Compute departmental overhead rates assuming that Bergeron's expects to incur 14,800 MH in the Machining Department and 16,000 DL hours in the Finishing Department during the year. First identify the formula, then compute the rate for each department. (Round your answers to the nearest whole dollar.) $ $ Job 450 Job 455 Total department overhead 730,000 720,000 + Plantwide overhead rate 58 58 Machining Finishing Total overhead allocation = Plantwide overhead rate = $ 58 Cost allocation base (estimated) 14,600 16,000 X X Requirement 3. If Bergeron's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455? First identify the formula, then calculate the amount of manufacturing overhead that would be allocated to the jobs if the plantwide overhead rate is used. (Round your answers to the nearest whole dollar.) Manufacturing overhead = Actual use of allocation base 7 7 = $ 50 S = $ 45 Departmental overhead rate = = S = S per mach. hour per DL hour C allocated 406 406 Requirement 4. If Bergeron's uses departmental overhead rates, how much manufacturing overhead would be allocated to Job 450 and Job 455? Use the following table to calculate the amount of manufacturing overhead that would be allocated to the jobs if the departmental overhead rates are used. (Round your answers to the nearest whole dollar.) Job 455 Job 450
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