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Exercise 9-29 (Algo) Plantwide versus Department Allocation (LO 9-2, 3) West State Furniture (WSF) manufactures desks and desk chairs using two departments within a single facility. The West Department produces the desks, and the State Department produces the chairs. WSF uses plantwide allocation to allocate its overhead to all products. Direct materials cost is the allocation base. The rate used is 60 percent of direct materials cost. Last year, revenue, direct materials, and direct labor were as follows. Sales revenue Direct materials Direct labor Desks $ 1,155,000 492,800 189,000 a. Using plantwide allocation b. Using department's allocation rate Chairs $ 1,020,000 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). 316,800 126,500 Desk Profit or Loss Chairs

Exercise 9-29 (Algo) Plantwide versus Department Allocation (LO 9-2, 3) West State Furniture (WSF) manufactures desks and desk chairs using two departments within a single facility. The West Department produces the desks, and the State Department produces the chairs. WSF uses plantwide allocation to allocate its overhead to all products. Direct materials cost is the allocation base. The rate used is 60 percent of direct materials cost. Last year, revenue, direct materials, and direct labor were as follows. Sales revenue Direct materials Direct labor Desks $ 1,155,000 492,800 189,000 a. Using plantwide allocation b. Using department's allocation rate Chairs $ 1,020,000 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). 316,800 126,500 Desk Profit or Loss Chairs

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 28E: Minor Co. has a job order cost system and applies overhead based on departmental rates. Service...
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Exercise 9-29 (Algo) Plantwide versus Department Allocation (LO 9-2, 3) West State Furniture (WSF) manufactures desks and desk chairs using two departments within a single facility. The West Department produces the desks, and the State Department produces the chairs. WSF uses plantwide allocation to allocate its overhead to all products. Direct materials cost is the allocation base. The rate used is 60 percent of direct materials cost. Last year, revenue, direct materials, and direct labor were as follows. Sales revenue Direct materials Direct labor Desks Chairs $ 1,155,000 $ 1,020,000 492,800 189,000 a. Using plantwide allocation b. Using department's allocation rate 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). 316,800 126,500 Profit or Loss Desk Chairs
Transcribed Image Text:Exercise 9-29 (Algo) Plantwide versus Department Allocation (LO 9-2, 3) West State Furniture (WSF) manufactures desks and desk chairs using two departments within a single facility. The West Department produces the desks, and the State Department produces the chairs. WSF uses plantwide allocation to allocate its overhead to all products. Direct materials cost is the allocation base. The rate used is 60 percent of direct materials cost. Last year, revenue, direct materials, and direct labor were as follows. Sales revenue Direct materials Direct labor Desks Chairs $ 1,155,000 $ 1,020,000 492,800 189,000 a. Using plantwide allocation b. Using department's allocation rate 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). 316,800 126,500 Profit or Loss Desk Chairs
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