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	$	4,370,000	$	4,830,000	$	9,200,000
Direct labor-hours		115,000		69,000		184,000
Machine-hours		46,000		230,000		276,000

Job Bravo	Assembly	Fabrication	Total
Direct labor-hours	24	16	40
Machine-hours	16	19	35

Required:

1. Assume Wilmington uses a plantwide predetermined overhead rate based on direct labor-hours. Calculate the predetermined overhead rate and the amount of manufacturing overhead applied to Job Bravo.

2. Assume 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. Calculate the predetermined overhead rate for each department and the manufacturing overhead applied to Job Bravo using departmental rates.

(Round your intermediate calculation to 2 decimal places.)

3. Do you recommend that Wilmington use a plantwide overhead rate or departmental overhead rates? Why?

Answer 1

	Estimated Data	Assembly	Fabrication	Total
	Manufacturing overhead costs	4370000	4830000	9200000
	Direct labor-hours	115000	69000	184000
	Machine-hours	46000	230000	276000
	Job Bravo	Assembly	Fabrication	Total
	Direct labor-hours	24	16	40
	Machine-hours	16	19	35
1	Manufacturing overhead costs	9200000
	Direct labor-hours	184000
	Predetermined OH Rate	50.00	Per DLH
	Allocation to Job Bravo:
	Direct labor-hours	40.00
	Predetermined OH Rate	50.00
	Allocated Manufacturing OH	2000
2		Assembly	Fabrication
	Basis of Allocation	DLH	MH
	Manufacturing overhead costs	4370000	4830000
	Direct labor-hours	115000
	Machine-hours		230000
	Predetermined OH Rate	38.00	21.00	Estimated OH for the Dept/Estimated Activity for the Dep
		Per DLH	Per MH
	Allocation to Job Bravo:	Assembly	Fabrication
	DLH	24.00		Department OH Rate* Actual Activity
	MH		19.00
	Allocated Manufacturing OH	912	399
	Total Allocation	1311
3	Wilmington should use Departmental OH Rate; Since complete infromation about the Break up of allocation base is available
	Going by Departmental OH Allocation method; More precise allocation will be done

	Estimated Data	Assembly	Fabrication	Total
	Manufacturing overhead costs	4370000	4830000	9200000
	Direct labor-hours	115000	69000	184000
	Machine-hours	46000	230000	276000
	Job Bravo	Assembly	Fabrication	Total
	Direct labor-hours	24	16	40
	Machine-hours	16	19	35
1	Manufacturing overhead costs	9200000
	Direct labor-hours	184000
	Predetermined OH Rate	50.00	Per DLH
	Allocation to Job Bravo:
	Direct labor-hours	40.00
	Predetermined OH Rate	50.00
	Allocated Manufacturing OH	2000
2		Assembly	Fabrication
	Basis of Allocation	DLH	MH
	Manufacturing overhead costs	4370000	4830000
	Direct labor-hours	115000
	Machine-hours		230000
	Predetermined OH Rate	38.00	21.00	Estimated OH for the Dept/Estimated Activity for the Dep
		Per DLH	Per MH
	Allocation to Job Bravo:	Assembly	Fabrication
	DLH	24.00		Department OH Rate* Actual Activity
	MH		19.00
	Allocated Manufacturing OH	912	399
	Total Allocation	1311
3	Wilmington should use Departmental OH Rate; Since complete infromation about the Break up of allocation base is available
	Going by Departmental OH Allocation method; More precise allocation will be done