pl solve EXERCISE 3-15 Departmental Overhead Rates [LO1, LO2, LO3]Diewold Company has two departments, Milling and Assembly. The company uses a job-ordercosting system and computes a predetermined overhead rate in each department. The MillingDepartment bases its rate on machine-hours, and the Assembly Department bases its rate on directlabor-hours. At the beginning of the year, the company made the following estimates:DepartmentMillingAssemblyDirect labor-hours ...8,00060,000$390,00080,0003,000$500,000Machine-hours .Total fixed manufacturing overhead cost ...$2.00Variable manufacturing overhead per machine-hourVariable manufacturing overhead per direct labor-hour-$3.75Required:1. Compute the predetermined overhead rate to be used in each department.2. Assume that the overhead rates you computed in (1) above are in effect. The job cost sheet forJob 407, which was started and completed during the year, showed the following:DepartmentMillingAssemblyDirect labor-hours...520Machine-hours .904Materials requisitioned .$800$370Direct labor cost ..$45$160Compute the total manufacturing cost assigned to Job 407.

The concept of Applied Overhead does not affect financial reporting but is highly relevant for…

Diewold Company has two departments, Milling and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Milling Department bases its rate on machine-hours, and the Assembly Department bases its rate on direct labor-hours. At the beginning of the year, the company made the following estimates: Department Milling Assembly Direct labor-hours .. 8,000 60,000 $390,000 80,000 3,000 $500,000 Machine-hours ... Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour . $2.00 $3.75 Required: 1. Compute the predetermined overhead rate to be used in each department. 2. Assume that the overhead rates you computed in (1) above are in effect. The job cost sheet for Job 407, which was started and completed during the year, showed the following: Department Milling Assembly Direct labor-hours . 5 20 Machine-hours ... 90 4 Materials requisitioned $800 $370 Direct labor cost .... $45 $160 Compute the total manufacturing cost assigned to Job 407.

Diewold Company has two departments, Milling and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Milling Department bases its rate on machine-hours, and the Assembly Department bases its rate on direct labor-hours. At the beginning of the year, the company made the following estimates: Department Milling Assembly Direct labor-hours .. 8,000 60,000 $390,000 80,000 3,000 $500,000 Machine-hours ... Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour . $2.00 $3.75 Required: 1. Compute the predetermined overhead rate to be used in each department. 2. Assume that the overhead rates you computed in (1) above are in effect. The job cost sheet for Job 407, which was started and completed during the year, showed the following: Department Milling Assembly Direct labor-hours . 5 20 Machine-hours ... 90 4 Materials requisitioned $800 $370 Direct labor cost .... $45 $160 Compute the total manufacturing cost assigned to Job 407.

Financial & Managerial Accounting

14th Edition

ISBN:9781337119207

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter18: Activity-Based Costing

Section: Chapter Questions

Problem 18.2APR: Multiple production department factory overhead rates The management of Orange County Chrome...

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Factory overhead rate Fabricator Inc., a specialized equipment manufacturer, uses a job order cost system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now $3,000 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our accounting system doesn't make any sense to me. It tells me that every labor hour carries an additional burden of $3,000. This means that while direct labor makes up only 5% of our total product cost, it drives all our costs. In addition, these rates give my design engineers incentives to "design out" direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I won't be surprised if next year the rate is $4,000 per direct labor hour. I'm also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30~minute error in our estimate of assembly time is worth $ 1,500. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business. What do you think is a possible solution?
Factory overhead rate Fabricator Inc., a specialized equipment manufacturer, uses a job order cost system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now $3,000 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our accounting system doesn't make any sense to me. It tells me that every labor hour carries an additional burden of $3,000. This means that while direct labor makes up only 5% of our total product cost, it drives all our costs. In addition, these rates give my design engineers incentives to "design out" direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I won't be surprised if next year the rate is $4,000 per direct labor hour. I'm also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30~minute error in our estimate of assembly time is worth $ 1,500. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business. What did the engineer mean about the large overhead rate being a disadvantage when plating bids and seeking new business?
Factory overhead rate Salvo Inc., a specialized equipment manufacturer, uses a job order costing system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now 1,500 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our accounting system doesnt make any sense to me. It tells me that every labor hour carries an additional burden of 1,500. This means that direct labor makes up only 6% of our total product cost, yet it drives all our costs. In addition, these rates give my design engineers incentives to design out direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I wont be surprised if next year the rate is 2,000 per direct labor hour. Im also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30-minute error in our estimate of assembly time is worth 750. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business. 1. What is the engineer's concern about the overhead rate going up and up? 2. What did the engineer mean about the large overhead rate being a disadvantage when placing bids and seeking new business? 3. What do you think is a possible solution?
Multiple production department factory overhead rates The management of Orange County Chrome Company, described in Problem 1A, now plans to use the multiple production department factory overhead rate method. The total factory overhead associated with each department is as follows: Stamping Department 115,200 Plating Department 105,600 Total 220,800 Instructions 1. Determine the multiple production department factory overhead rates, using direct labor hours for the Stamping Department and machine hours for the Plating Department. 2. Determine the product factory- overhead costs, using the multiple production department rates in (1).
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