Job order costing system is used by Amber Inc. Machine hours is used as the based for plantwide overhead rate. However, the manager has heard that overhead rate by department can improve cost assignment than plantwide rate. Below is the information for the two departments: Department A Department B Overhead costs (expected) $75,000 $33,000 Normal activity (machine hours) 10,000 8,000 Required: 1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. 2. Compute predetermined overhead rates for each department using machine hours. (Note: Carry your calculations out to three decimal places.) 3. Job 73 used 20 machine hours from Department A and 50 machine hours from Department B. Job 74 used 50 machine hours from Department A and 20 machine hours from Department B. Compute the overhead cost assigned to each job using the plantwide rate computed in Requirement 1. Repeat the computation using the departmental rates found in Requirement 2. Which of the two approaches gives the fairer assignment? Why? (Note: Round cost to the nearest cent.)
Job order costing system is used by Amber Inc. Machine hours is used as the based for plantwide overhead rate. However, the manager has heard that overhead rate by department can improve cost assignment than plantwide rate. Below is the information for the two departments: Department A Department B Overhead costs (expected) $75,000 $33,000 Normal activity (machine hours) 10,000 8,000 Required: 1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. 2. Compute predetermined overhead rates for each department using machine hours. (Note: Carry your calculations out to three decimal places.) 3. Job 73 used 20 machine hours from Department A and 50 machine hours from Department B. Job 74 used 50 machine hours from Department A and 20 machine hours from Department B. Compute the overhead cost assigned to each job using the plantwide rate computed in Requirement 1. Repeat the computation using the departmental rates found in Requirement 2. Which of the two approaches gives the fairer assignment? Why? (Note: Round cost to the nearest cent.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Job Order Costing – Problem 2
Job order costing system is used by Amber Inc. Machine hours is used as the based for plantwide
overhead rate. However, the manager has heard that overhead rate by department can improve
cost assignment than plantwide rate. Below is the information for the two departments:
Department A Department B
Overhead costs (expected)
$75,000
$33,000
Normal activity (machine hours)
10,000
8,000
Required:
1. Compute a predetermined overhead rate for the plant as a whole based on machine hours.
2. Compute predetermined overhead rates for each department using machine hours. (Note:
Carry your calculations out to three decimal places.)
3. Job 73 used 20 machine hours from Department A and 50 machine hours from Department B.
Job 74 used 50 machine hours from Department A and 20 machine hours from Department B.
Compute the overhead cost assigned to each job using the plantwide rate computed in
Requirement 1. Repeat the computation using the departmental rates found in Requirement 2.
Which of the two approaches gives the fairer assignment? Why? (Note: Round cost to the nearest
cent.)
4. Conceptual Connection Repeat Requirement 3, assuming the expected overhead cost for
Department B is $60,000 (not $33,000). For this
rates over a plantwide rate? (Note: Round overhead rates to the nearest cent.)
company,
would
you recommend departmental
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