Mariposa, Inc., produces machine tools and currently uses a plantwide overhead rate, based on machine hours. Harry Whipple, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than can a plantwide rate. Mariposa has the following data for its two departments for the coming year: Department A Department B Overhead costs (expected) $528,000 $132,000 Normal activity (machine hours) 110,000 55,000 Required: 1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. $fill in the blank 1 per machine hour 2. Compute predetermined overhead rates for each department using machine hours. Round your answers to one decimal place. Department A $fill in the blank 2 per machine hour Department B $fill in the blank 3 per machine hour 3. Suppose that a machine tool (Product X75) used 60 machine hours from Department A and 140 machine hours from Department B. A second machine tool (Product Y15) used 140 machine hours from Department A and 60 machine hours from Department B. Compute the overhead cost assigned to each product using the plantwide rate computed in Requirement 1. Product X75 Product Y15 Plantwide: $fill in the blank 4 $fill in the blank 5 Repeat the computation using the departmental rates found in Requirement 2. Product X75 Product Y15 Departmental: $fill in the blank 6 $fill in the blank 7 Which of the two approaches gives the fairest assignment? 4. Repeat Requirement 3 assuming the expected overhead cost for Department B is $264,000. Product X75 Product Y15 Plantwide: $fill in the blank 9 $fill in the blank 10 Departmental: $fill in the blank 11 $fill in the blank 12 Would you recommend departmental rates over a plantwide rate?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mariposa, Inc., produces machine tools and currently uses a plantwide overhead rate, based on machine hours. Harry Whipple, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than can a plantwide rate.
Mariposa has the following data for its two departments for the coming year:

Department A Department B

Overhead costs (expected) $528,000 $132,000

Normal activity (machine hours) 110,000 55,000

Required:

1. Compute a predetermined overhead rate for the plant as a whole based on machine hours.
$fill in the blank 1 per machine hour

2. Compute predetermined overhead rates for each department using machine hours. Round your answers to one decimal place.

Department A $fill in the blank 2 per machine hour

Department B $fill in the blank 3 per machine hour

3. Suppose that a machine tool (Product X75) used 60 machine hours from Department A and 140 machine hours from Department B. A second machine tool (Product Y15) used 140 machine hours from Department A and 60 machine hours from Department B. Compute the overhead cost assigned to each product using the plantwide rate computed in Requirement 1.

Product X75 Product Y15

Plantwide: $fill in the blank 4 $fill in the blank 5

Repeat the computation using the departmental rates found in Requirement 2.

Product X75 Product Y15

Departmental: $fill in the blank 6 $fill in the blank 7

Which of the two approaches gives the fairest assignment?

4. Repeat Requirement 3 assuming the expected overhead cost for Department B is $264,000.

Product X75 Product Y15

Plantwide: $fill in the blank 9 $fill in the blank 10

Departmental: $fill in the blank 11 $fill in the blank 12

Would you recommend departmental rates over a plantwide rate?

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