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Lansing, Inc., provided the following data for its two producing departments: Molding      Polishing      Total...

Lansing, Inc., provided the following data for its two producing departments:

Molding      Polishing      Total
Estimated overhead         $375,000         $80,000         $455,000
Direct labor hours (expected and actual):
    Form A         1,000         5,000         6,000
    Form B         4,000         15,000         19,000
      Total         5,000         20,000         25,000
Machine hours:
    Form A         3,600         3,000         6,600
    Form B         1,400         2,000         3,400
      Total         5,000         5,000         10,000

Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 20,000 units of Form A produced and sold and 50,000 of Form B.

Required:

1. Calculate the overhead rates for each department.

Molding $ per machine hour
Polishing $ per direct labor hour

2. Using departmental rates, assign overhead to the two products and calculate the overhead cost per unit. Round your answers to the nearest cent.

Unit Overhead Cost
Assigned unit overhead cost for Form A $ per unit
Assigned unit overhead cost for Form B $ per unit

How does this compare with the plantwide rate unit cost, using direct labor hours?
Relative to the plantwide rate, the cost increased  for Form A and decreased  for Form B.

3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates. Round your answers to the nearest cent.

Unit Overhead Cost
Form A $ per unit
Form B $ per unit


Compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?

Relative to the plantwide rate, the cost increased  for Form A and decreased  for Form B.

Solutions

Expert Solution

1)

Molding Polishing
Estimated overhead 375000 80000
Estimated activity 5000 machine hours 20000 direct labor hours
Overhead rate 375000/5000 =$ 75 per MH 80000/20000=$ 4 per DLH

2)If departmental overhead rate is used :

Form A Form B
Molding 3600*75=270000 1400*75=105000
polishing 5000*4=20000 15000*4=60000
Total overhead 290000 165000
Number of units 20000 50000
Overhead cost per unit 14.50 3.30

If Plantwide overhead rate is used,Overhead rate = 455000/25000 = $ 18.2 per DLH

Form A Form B
number of DLH 6000 19000
Overhead rate 18.2 18.2
Total overhead allocated 109200 345800
Number of units 20000 50000
Unit overhead cost 109200/20000=5.46 6.916

Relative to the plantwide rate, the cost increased  for Form A and decreased  for Form B under Departmental overhead rate

3)

Form A Form B
Molding 1200*75=90000 3800*75=285000
polishing 5000*4=20000 15000*4=60000
Total overhead 110000 345000
Number of units 20000 50000
Overhead cost per unit 5.50 6.90

Relative to the plantwide rate, the cost increased  for Form A and decreased  for Form B.

ekkarill92 answered 1 year ago
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