Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments-- Molding and Fabrication. It started,completed, and sold only two jobs during March--Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

                                                                                            Molding         Fabrication     Total

Estimated total machine- hours used                                 2500                 1500             4000

Estimated total fixed manufacturing over head                    $10,750            $15,450         $26200

Estimated variable manufacturing overhead per machine-hour    $1.70                $2.50

                          Job P Job Q                                 

Direct Materials                           $16,000        $9,500

Direct Labor Cost                                     $23,400       $8,700

Actual machine- hours used:      

Molding                                   2,000             1,100

Fabrication                                 900              1,200

Total                                          2900              2,300

Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month.

Required:

For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.

1. What was the company's plantwide predetermined overhead rate? (Round your answer to 2 decimal places.)

Predetermined overhead rate per MH _________

Answer 1

It is given that the company uses a plantwide predetermined overhead rate with machine-hours as the allocation base.

To calculate the predetermined plantwide overhead rate, we need to divide the total estimated overhead with the total number of machine hours. We need not consider the separate departments or separate products.

We are provided with the estimated fixed overhead for Department-Molding as $10,750; and for Department-Fabrication as $15,450, when we combine the both we get a total estimated fixed overhead to $26,200.

Variable overhead is given per machine hour and we are also provided with the estimated machine hours for each department, by calculating we get the following variable overheads for the departments-

1. Department-Molding - $4,250 ($1.70 × 2500 machine hours)
2. Department-Fabrication - $3,750 ($2.5 × 1500 machine hours)
3. Total estimated variable overhead for the whole plant is $8,000 ($4,250 + $3,750)

Total estimated overhead is $34,200; we get this by adding the total estimated fixed overhead and total estimated variable overhead.

Total estimated machine hours are 4,000 machine-hours.

Therefore, plantwide predetermined overhead rate = $855 per machine-hour. ($34,200 ÷ 4,000 machine hours)