Question

In: Accounting

Wilmington Company has two manufacturing departments--Assembly and Fabrication. It considers all of its manufacturing overhead costs...

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?

Solutions

Expert Solution

All amounts are in $
1-Plantwide predetremined overhead rate basd on direct labor hours
Plant wide predetermined overhead rate refers to rate decided by taking an activity as base to apportion
the fixed costs based on use of such activity by the departments of entity
In this case direct labour hours is base for setting rate and it is as follows
Predetermined rate= Budgeted Fixed cost/ Bedgeted direct labour hours=9200000/184000=50.00/Direct labour hours
Job Bravo has used total 40 hours of direct labor hours ,accorindlgy amount of manufacturing overhead allocated as follows
No.of direct labour hours used by Job Bravo * 50/Hour=40*50=2,000.00
2-Department wide predetremined overhead rate
In this case each department uses their activity as basis to set departmental overhead rate as follows
Assembly department= Manufacturing overhead of assembly department/Direct labour hours consumed by deparment
                                                  43,70,000/115,000=38/ Direct labour hour
Fabrication department= Manufacturing overhead of fabrication department/Direct labour hours consumed by deparment
                                                48,30,000/230,000=21/Machine Hour
Job Bravo allocation as follows:
Assembly ---- 40 Direct labor hours * 38/hour=735.00
Fabrication---35 Machine hours*21/hour         = 1,520.00
Total overhead allocated                                           2,255.00
3-Recommendation: Departmental wide overhead rates
Use of departmental rates shows realstic approach and reasonable allocation as overhead rate directly associated with major activity of that department

Related Solutions

Wilmington Company has two manufacturing departments--Assembly and Fabrication. It considers all of its manufacturing overhead costs...
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 $ 6,720,000 $ 7,280,000 $ 14,000,000 Direct labor-hours 140,000 84,000 224,000 Machine-hours 56,000 280,000 336,000 Job Bravo Assembly...
Wilmington Company has two manufacturing departments--Assembly and Fabrication. It considers all of its manufacturing overhead costs...
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...
Wilmington Company has two manufacturing departments--Assembly and Fabrication. It considers all of its manufacturing overhead costs...
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 $ 3,960,000 $ 4,400,000 $ 8,360,000 Direct labor-hours 110,000 66,000 176,000 Machine-hours 44,000 220,000 264,000 Job Bravo Assembly...
Wilmington Company has two manufacturing departments--Assembly and Fabrication. It considers all of its manufacturing overhead costs...
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 $ 2,850,000 $ 3,230,000 $ 6,080,000 Direct labor-hours 95,000 57,000 152,000 Machine-hours 38,000 190,000 228,000 Job Bravo Assembly...
Wilmington Company has two manufacturing departments--Assembly and Fabrication. It considers all of its manufacturing overhead costs...
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 $ 7,250,000 $ 7,830,000 $ 15,080,000 Direct labor-hours 145,000 87,000 232,000 Machine-hours 58,000 290,000 348,000 Job Bravo Assembly...
Wilmington Company has two manufacturing departments--Assembly and Fabrication. It considers all of its manufacturing overhead costs...
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...
Wilmington Company has two manufacturing departments--Assemblyand Fabrication. It considers all of its manufacturing overheadcosts...
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 DataAssemblyFabricationTotalManufacturing overhead costs$7,800,000$8,400,000$16,200,000Direct labor-hours150,00090,000240,000Machine-hours60,000300,000360,000Job BravoAssemblyFabricationTotalDirect labor-hours312354Machine-hours232649Required:1. If Wilmington used a plantwide predetermined overhead rate based on direct labor-hours, how much manufacturing overhead would be applied to...
Wilmington Company has two manufacturing departments—Assembly and Fabrication.
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 DataAssemblyFabricationTotalManufacturing overhead costs$5,720,000$6,240,000$11,960,000Direct labor-hours130,00078,000208,000Machine-hours52,000260,000312,000Job BravoAssemblyFabricationTotalDirect labor-hours271946Machine-hours192241Required:1. If Wilmington used a plantwide predetermined overhead rate based on direct labor-hours, how much manufacturing overhead would be applied to...
Wilmington Company has two manufacturing departments—Assembly and Fabrication
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 DataAssemblyFabricationTotalManufacturing overhead costs$5,720,000$6,240,000$11,960,000Direct labor-hours130,00078,000208,000Machine-hours52,000260,000312,000Job BravoAssemblyFabricationTotalDirect labor-hours271946Machine-hours192241Required:1. If Wilmington used a plantwide predetermined overhead rate based on direct labor-hours, how much manufacturing overhead would be applied to...
Mason Company has two manufacturing departments—Machining and Assembly. The company considers all of its manufacturing overhead...
Mason Company has two manufacturing departments—Machining and Assembly. The company considers all of its manufacturing overhead costs to be fixed costs. It provided the following estimates at the beginning of the year as well as the following information with respect to Jobs A and B: Estimated DataMachiningAssemblyTotalManufacturing overhead$12,500,000 $625,000 $13,125,000 Direct labor hours 25,000  500,000  525,000 Machine hours 500,000  20,000  520,000 Job AMachiningAssemblyTotalDirect labor hours51015Machine hours11213 Job BMachiningAssemblyTotalDirect labor hours459Machine hours12315 Required: 1. If Mason Company uses a plantwide predetermined overhead rate with direct...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT