Lansing, Inc., provided the following data for its two producing departments:  MoldingPolishingTotalEstimated overhead$400,000$80,000$480,000Direct labour hours (expected andactual):   Form A1,0005,0006,000FormB4,00015,00019,000Total5,00020,00025,000Machine hours:   Form A3,5003,0006,500FormB1,5002,0003,500Total5,0005,00010,000 Machine hours are used to assign the overhead of the Molding Department, and direct laborhours are used to assign the overhead of the Polishing Department. There are 30,000 units ofForm A produced and sold and 50,000 of Form B. Required:Calculate the overhead rates for each department.Using departmental rates, assign overhead to the two products and calculate the overhead costper unit. How does this compare with-the plantwide rate unit cost, using direct labour hours?What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form Band thedirect labour hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overheadcost per unit for each product using departmental rates,and compare with the plantwiderate unit costs calculated in Requirement 2. What can you conclude from this outcome?

Question
Asked Jan 17, 2020
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Lansing, Inc., provided the following data for its two producing departments:

 

 

Molding

Polishing

Total

Estimated overhead

$400,000

$80,000

$480,000

Direct labour hours (expected andactual):

 

 

 

Form A

1,000

5,000

6,000

FormB

4,000

15,000

19,000

Total

5,000

20,000

25,000

Machine hours:

 

 

 

Form A

3,500

3,000

6,500

FormB

1,500

2,000

3,500

Total

5,000

5,000

10,000

 

Machine hours are used to assign the overhead of the Molding Department, and direct laborhours are used to assign the overhead of the Polishing Department. There are 30,000 units ofForm A produced and sold and 50,000 of Form B.

 

Required:

  1. Calculate the overhead rates for each department.
  2. Using departmental rates, assign overhead to the two products and calculate the overhead costper unit. How does this compare with-the plantwide rate unit cost, using direct labour hours?
  3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form Band thedirect labour hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overheadcost per unit for each product using departmental rates,and compare with the plantwiderate unit costs calculated in Requirement 2. What can you conclude from this outcome?

 

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