OVERHEAD RATES, UNIT COSTS Xanning Company manufactures specialty tools to customer order. There are three pro- ducing departments. Departmental information on budgeted overhead and various ac- vity measures for the coming year is as follows: Estimated overhead Direct labour hours Direct labour cost Machine hours Welding $200,000 4,500 $90,000 5,000 Direct materials Direct labour cost Direct labour hours: Assembly $22,000 10,000 $150,000 1,000 Currently, overhead is applied on the basis of machine hours using a plantwide rate. However, Janine, the controller, has been wondering whether it might be worth- while to use departmental overhead rates. She has analyzed the overhead costs and driv- ers for the various departments and decided that Welding and Finishing should base their overhead rates on machine hours and that Assembly should base its overhead rate an direct labour hours. Janine has been asked to prepare bids for two jobs with the following information: Job 1 Job 2 $4,500 $8,600 $1,000 $2,000 Welding Assembly Finishing Number of machine hours: 10 60 30 Finishing $250,000 6,000 $120,000 2,000 50 40 110 20 20 80 30 Welding 5 Assembly Finishing 165 The typical bid price includes a 30 percent markup over full manufacturing cost. Required: 1 Calculate a plantwide rate for Xanning Company based on machine hours. What is the bid price of each job using this rate? Calculate departmental overhead rates for the producing departments. What is the bid price of each job using these rates? (Round all answers to the nearest dollar.)
OVERHEAD RATES, UNIT COSTS Xanning Company manufactures specialty tools to customer order. There are three pro- ducing departments. Departmental information on budgeted overhead and various ac- vity measures for the coming year is as follows: Estimated overhead Direct labour hours Direct labour cost Machine hours Welding $200,000 4,500 $90,000 5,000 Direct materials Direct labour cost Direct labour hours: Assembly $22,000 10,000 $150,000 1,000 Currently, overhead is applied on the basis of machine hours using a plantwide rate. However, Janine, the controller, has been wondering whether it might be worth- while to use departmental overhead rates. She has analyzed the overhead costs and driv- ers for the various departments and decided that Welding and Finishing should base their overhead rates on machine hours and that Assembly should base its overhead rate an direct labour hours. Janine has been asked to prepare bids for two jobs with the following information: Job 1 Job 2 $4,500 $8,600 $1,000 $2,000 Welding Assembly Finishing Number of machine hours: 10 60 30 Finishing $250,000 6,000 $120,000 2,000 50 40 110 20 20 80 30 Welding 5 Assembly Finishing 165 The typical bid price includes a 30 percent markup over full manufacturing cost. Required: 1 Calculate a plantwide rate for Xanning Company based on machine hours. What is the bid price of each job using this rate? Calculate departmental overhead rates for the producing departments. What is the bid price of each job using these rates? (Round all answers to the nearest dollar.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:OVERHEAD RATES, UNIT COSTS
Xanning Company manufactures specialty tools to customer order. There are three pro-
ducing departments. Departmental information on budgeted overhead and various ac-
vity measures for the coming year is as follows:
Estimated overhead
Direct labour hours
Direct labour cost
Machine hours
Welding
$200,000
4,500
$90,000
5,000
Direct materials
Direct labour cost
Direct labour hours:
Assembly
$22,000
10,000
$150,000
1,000
Currently, overhead is applied on the basis of machine hours using a plantwide
rate. However, Janine, the controller, has been wondering whether it might be worth-
while to use departmental overhead rates. She has analyzed the overhead costs and driv-
ers for the various departments and decided that Welding and Finishing should base
their overhead rates on machine hours and that Assembly should base its overhead rate
an direct labour hours.
Janine has been asked to prepare bids for two jobs with the following information:
Job 1
Job 2
$4,500
$8,600
$1,000
$2,000
Welding
Assembly
Finishing
Number of machine hours:
10
60
30
Finishing
$250,000
6,000
$120,000
2,000
50
40
110
20
20
80
30
Welding
5
Assembly
Finishing
165
The typical bid price includes a 30 percent markup over full manufacturing cost.
Required:
1 Calculate a plantwide rate for Xanning Company based on machine hours. What is
the bid price of each job using this rate?
Calculate departmental overhead rates for the producing departments. What is the
bid price of each job using these rates? (Round all answers to the nearest dollar.)
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