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	$	6,210,000	$	6,750,000	$	12,960,000
Direct labor-hours		135,000		81,000		216,000
Machine-hours		54,000		270,000		324,000

Job Bravo	Assembly	Fabrication	Total
Direct labor-hours	28	20	48
Machine-hours	20	23	43

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

The overhead applied to Job Bravo is computed as follows:
Direct labor-hours worked on Bravo (a)	48
Predetermined overhead rate (b)	$                   60	per DLH
Overhead applied to Bravo (a) × (b)	$             2,880

Explanations :-

The predetermined plantwide overhead rate is computed as follows:
Estimated manufacturing overhead (a)	$   12,960,000
Estimated total direct labor-hours (b)	216000	DLH
Predetermined overhead rate (a) ÷ (b)	$                   60	per DLH

(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?

The overhead applied to Job Bravo is computed as follows:
	Assembly	Fabrication	Total
Quantity of allocation base used (a)	28	23
Predetermined overhead rate (b)	$46	$25
Overhead applied to Bravo (a) × (b)	$1,288	$575	$ 1,863

Explanations:-

The predetermined overhead rate in Assembly is computed as follows:
Estimated manufacturing overhead (a)	$     6,210,000
Estimated total direct labor-hours (b)	135000	DLH
Predetermined overhead rate (a) ÷ (b)	$                   46	per DLH
The predetermined overhead rate in Fabrication is computed as follows:
Estimated manufacturing overhead (a)	$     6,750,000
Estimated total machine-hours (b)	270000	MHs
Predetermined overhead rate (a) ÷ (b)	$                   25	per MH