major-ACFI2003 - 1.1). Predetermined plant wide rate =...

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1.1). Predetermined plant wide rate=600,000+300,00040,000+50,000=$10 per direct labor hourAll direct labour was paid $10 per DLH.Job 2785:Job 2785$Material cost22,000Direct labour costFabrication12,000Assembly7,400Manufacturing overheadFabrication12,000(1,2000/$10) x $10 per DLHAssembly4,300(7,400/$10) x $10 per DLHTotal$60,8001.2). Depatments overhead rates (Fabrication)=600,00040,000= $15 per DLHDepatments overhead rates (Assembly) =300,00050,000= $6 per DLHJob 2785$Material cost22,000Direct labor costsFabrication12,000Assembly7,400Manufacturing overheadFabrication18,000(12,000/$10) x $15 per DLHAssembly4,440(7,400/$10) x $6 per DLHTotal$63,840Plantwideoverhead rateFabricationAssembly$10/DLHDepartment overhead rate$15/DLH$6/DLH
1.3).Based on Jackson industries , the predetermined plantwide rate applied to joborders and is often calculated by dividing the total overhead cost by the selectedallocation base (90,000 direct labour hour), which is $10 per direct labor hour. Itis the simples approach includes merging all overhead costs so that a singleplantwide overhead rate can be computed and use to apply overhead to product.‘When the overhead was applied on the basis of direct labor hours, the majorityof the overhead is applied to high-volume product’ (Barth, 2008).In addition,plant-wide allocation allocates actual overhead by using direct labor hours as theactivity base. Generally, it is not very accurate to use this simple method.Generally, it can only use by businnes that have strong single cost driver that forall product in all departments (Kaplan & Atkinson, 1998).As the allocation bases is direct labor hours, overhead cost is connected to Job2785 by multiplying the predetermined overhead rate by the quantity of directlabor-hours charged to this employment. So the calculation and explanationbelow illustrate how the rate were built and how the overhead resources wereconsumed.
plantwide rate. This is because the departmental cost pools reflect the fact thatJob 2785 is an intensive user of Fabrication labor hours. The overhead rate inFabrication ($15) is higher than the overhead rate in Assembly ($4).Total MOH using Plantwide rate$19,400Total MOH using department rate$22,440$3,040The difference in manufacturing overhead that have been applied to the Jacksonindustries using plantwide rate and the departmental rates is $3,040. Thisdifference happens because of the different costs of overhead per DLH for theoverall cost of overhead for the plantwide rate against the differenct productiondepartments using the department rates.

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Term
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Cost driver, overhead costs

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