Question

Wilmington Company has two manufacturing departments--Assembly and Fabrication. It considers all of its manufacturing overhead costs to be fixed costs. The first set of data that is shown below is based on estimates from the beginning of the year. The second set of data relates to one particular job completed during the year--Job Bravo.

Estimated Data	Assembly		Fabrication		Total
Manufacturing overhead costs	$	7,800,000	$	8,400,000	$	16,200,000
Direct labor-hours		150,000		90,000		240,000
Machine-hours		60,000		300,000		360,000

Job Bravo	Assembly	Fabrication	Total
Direct labor-hours	31	23	54
Machine-hours	23	26	49

Required:

1. If Wilmington used a plantwide predetermined overhead rate based on direct labor-hours, how much manufacturing overhead would be applied to Job Bravo?

2. If Wilmington uses departmental predetermined overhead rates with direct labor-hours as the allocation base in Assembly and machine-hours as the allocation base in Fabrication, how much manufacturing overhead would be applied to Job Bravo?

(Round your intermediate calculation to 2 decimal places.)

Answer 1

1.

*Plantwide predetermined overhead rate=Total Estimated Manufacturing Overhead costs/ Total Direct Labor-Hours;

*Plantwide predetermined overhead rate= [$7,800,000+$8,400,000] / [150,000 DLH + 90,000 DLH];

*Plantwide predetermined overhead rate= $16,200,000 / 240,000 DLH;

*Plantwide predetermined overhead rate= $67.50 per DLH.

*Manufacturing Overhead applied to Job BRAVO: $67.50 per DLH * 54 DLH = $3,645.

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2.

*Assembly Department using basis as Direct labor-hours;

*Fabrication Department using basis as Machine-hours.

*Assembly overhead rate = $7,800,000 / 150,000 DLH =$52 per direct labor hour;

*Fabrication overhead rate = $8,400,000 / 300,000 MH =$28 per Machne hour.

*Assembly Department = $52 per DLH * 31 DLH = $1,612;

*Fabrication Department =$28 per MH * 26 MH = $728;

*Total Manufacturing overhead applied =$1,612+$728= $2,340.