Overhead Applied to Jobs, Departmental Overhead Rates Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate based on machine hours is used. Xania's plant manager has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Xania has the following data for its two departments for the coming year: Department A Department B $120,000 $69,000 13,500 13,800 Overhead costs (expected) Normal activity (machine hours) Required: 1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. Round your answer to two decimal places. 6.92 per machine hour 2. Compute predetermined overhead rates for each department using machine hours. (Note: Round to two decimal places, if necessary.) 8.89 ✓ per machine hour 5 per machine hour 3. Conceptual Connection: 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. Round final answers to the nearest cent if necessary. Department A Department B Plantwide Departmental Which of the two approaches gives the fairer assignment? Departmental rates ✓ ✓ Job 73 Plantwide 4. Conceptual Connection: Repeat Requirement 3, assuming the expected overhead cost for Department B is $94,000 (not $69,000). Round overhead rates to the nearest cent. Departmental Job 74 Yes ✔ Job 73 Job 74 For this company, would you recommend departmental rates over a plantwide rate?
Overhead Applied to Jobs, Departmental Overhead Rates Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate based on machine hours is used. Xania's plant manager has heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. Xania has the following data for its two departments for the coming year: Department A Department B $120,000 $69,000 13,500 13,800 Overhead costs (expected) Normal activity (machine hours) Required: 1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. Round your answer to two decimal places. 6.92 per machine hour 2. Compute predetermined overhead rates for each department using machine hours. (Note: Round to two decimal places, if necessary.) 8.89 ✓ per machine hour 5 per machine hour 3. Conceptual Connection: 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. Round final answers to the nearest cent if necessary. Department A Department B Plantwide Departmental Which of the two approaches gives the fairer assignment? Departmental rates ✓ ✓ Job 73 Plantwide 4. Conceptual Connection: Repeat Requirement 3, assuming the expected overhead cost for Department B is $94,000 (not $69,000). Round overhead rates to the nearest cent. Departmental Job 74 Yes ✔ Job 73 Job 74 For this company, would you recommend departmental rates over a plantwide rate?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Overhead Applied to Jobs, Departmental Overhead Rates
Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate
based on machine hours is used. Xania's plant manager has heard that departmental
overhead rates can offer significantly better cost assignments than a plantwide rate can
offer. Xania has the following data for its two departments for the coming year:
Department A Department B
$120,000
$69,000
13,500
Overhead costs (expected)
Normal activity (machine hours)
Required:
1. Compute a predetermined overhead rate for the plant a whole based on machine
hours. Round your answer to two decimal places.
6.92 ✓ per machine hour
2. Compute predetermined overhead rates for each department using machine hours.
(Note: Round to two decimal places, if necessary.)
Department A
8.89
per machine hour
5
per machine hour
3. Conceptual Connection: 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. Round final answers to the nearest cent,
if necessary.
Department B
Plantwide
Departmental
Departmental rates ✓
Job 73
Which of the two approaches gives the fairer assignment?
Plantwide
Departmental
13,800
4. Conceptual Connection: Repeat Requirement 3, assuming the expected overhead
cost for Department B is $94,000 (not $69,000). Round overhead rates to the nearest
cent.
Job 74
Yes ✔
Job 73
Job 74
For this company, would you recommend departmental rates over a plantwide rate?
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