West State Furniture (WSF) manufactures desks and desk chairs using two departments within a single facility. The West Departmentproduces the desks, and the State Department produces the chairs. WSF uses plantwide allocation to allocate its overhead to allproducts. Direct materials cost is the allocation base. The rate used is 60 percent of direct materials cost. Last year, revenue, directmaterials, and direct labor were as follows.Sales revenueDirect materialsDirect laborRequired:Desks$ 1,230,000531,300194,000a. Using plantwide allocationb. Using department's allocation rateChairs$ 1,095,000a. Compute the profit or loss for each product using plantwide allocation.b. The new CFO at WSF was surprised that the company used a plantwide rate, because the two products were produced in separatedepartments. The cost analyst estimated the overhead rates for each department separately. Using department rates, the WestDepartment rate would be 33 percent of direct materials cost. The State Department rate would be 102 percent of direct materialscost. Recompute the profits or loss for each product using each department's allocation rate (based on direct materials cost in eachdepartment).341,550131,500DeskProfit or LossChairs

Introduction:- The plantwide overhead rate formula is the estimated manufacturing overhead cost…

Required: a. Compute the profit or loss for each product using plantwide allocation. b. The new CFO at WSF was surprised that the company used a plantwide rate, because the two products were produced in separate departments. The cost analyst estimated the overhead rates for each department separately. Using department rates, the West Department rate would be 33 percent of direct materials cost. The State Department rate would be 102 percent of direct materials cost. Recompute the profits or loss for each product using each department's allocation rate (based on direct materials cost in each department). a. Using plantwide allocation b. Using department's allocation rate Profit or Loss Desk Chairs

Required: a. Compute the profit or loss for each product using plantwide allocation. b. The new CFO at WSF was surprised that the company used a plantwide rate, because the two products were produced in separate departments. The cost analyst estimated the overhead rates for each department separately. Using department rates, the West Department rate would be 33 percent of direct materials cost. The State Department rate would be 102 percent of direct materials cost. Recompute the profits or loss for each product using each department's allocation rate (based on direct materials cost in each department). a. Using plantwide allocation b. Using department's allocation rate Profit or Loss Desk Chairs

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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