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		2,500			1,500			4,000
Estimated total fixed manufacturing overhead	$	12,500		$	16,500		$	29,000
Estimated variable manufacturing overhead per machine-hour	$	2.40		$	3.20

	Job P			Job Q
Direct materials	$	23,000		$	13,000
Direct labor cost	$	29,000		$	11,500
Actual machine-hours used:
Molding		2,700			1,800
Fabrication		1,600			1,900
Total		4,300			3,700

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?

Answer 1

Predetermined overhead rate is used to apply manufacturing overhead to products or job orders and is usually computed at the beginning of each period by dividing the estimated manufacturing overhead cost by an allocation base. It excludes direct costs (That is direct material & direct labor). Here the allocation base is given as Machine Hours.

Estimated Manufacuring Overhead Rate= Estimated Manufacturing overheadEstimatedMAchine Hours

Plant overhead rate is the single overhead rate, it is not separated based on department.

PARTICULARS	AMOUNT
1. Estimated Total Fixed Overhead ($16500+$12500)	$29000
2. Estimated Total Machine Hours used (2500+1500 hrs)	4000 Hrs
3. Estimated Fixed Overhead Rate (1/2)	$7.25/ Hrs
4. Estimated Variable Manufacturing overhead Rate ((2.4*2500)+(3.2*1500))/4000	$2.7/Hrs
5. PLANT WIDE PREDETERMINED OVERHEAD RATE (3+4)	$9.95/HRS

Here the variable overhead rate can be calculate by ,

First determine the variable manufacturing overhead of each department

Ie,

For Molding department (2.4*2500)                                      = 6000

For Fabrication department (3.2*1500)                                  = 4800

Total variable manufacturing overhead                                  =$10800

Plantwide variable overhead rate per hour(10800/4000)        = 2.7/Hrs

For calculating the platwide manufacturing overhead rate, we need plantwide variable overhead rate per hr

PLANT WIDE PREDETERMINED OVERHEAD RATE IS $9.95/ HOUR