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

1.1). Predetermined plant wide rate =
600,000 + 300,000
40,000 + 50,000
= $10 per direct labor hour
All direct labour was paid $10 per DLH.
Job 2785:
Job 2785
$
Material cost 22,000
Direct labour cost
Fabrication 12,000
Assembly 7,400
Manufacturing overhead
Fabrication 12,000 (1,2000/$10) x $10 per DLH
Assembly 4,300 (7,400/$10) x $10 per DLH
Total $60,800
1.2). Depatments overhead rates (Fabrication) =
600,000
40,000
= $15 per DLH
Depatments overhead rates (Assembly) =
300,000
50,000
= $6 per DLH
Job 2785
$
Material cost 22,000
Direct labor costs
Fabrication 12,000
Assembly 7,400
Manufacturing overhead
Fabrication 18,000 (12,000/$10) x $15 per DLH
Assembly 4,440 (7,400/$10) x $6 per DLH
Total $63,840
Plantwide
overhead rate
Fabrication Assembly
$10/DLH Department overhead rate $15/DLH $6/DLH

1.3).
Based on Jackson industries , the predetermined plantwide rate applied to job
orders and is often calculated by dividing the total overhead cost by the selected
allocation base (90,000 direct labour hour), which is $10 per direct labor hour. It
is the simples approach includes merging all overhead costs so that a single
plantwide 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 majority
of the overhead is applied to high-volume product’ ( Barth, 2008). In addition,
plant-wide allocation allocates actual overhead by using direct labor hours as the
activity 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 for
all product in all departments (Kaplan & Atkinson, 1998).
As the allocation bases is direct labor hours, overhead cost is connected to Job
2785 by multiplying the predetermined overhead rate by the quantity of direct
labor-hours charged to this employment. So the calculation and explanation
below illustrate how the rate were built and how the overhead resources were
consumed.

plantwide rate. This is because the departmental cost pools reflect the fact that
Job 2785 is an intensive user of Fabrication labor hours. The overhead rate in
Fabrication ($15) is higher than the overhead rate in Assembly ($4).
Total MOH using Plantwide rate $19,400
Total MOH using department rate $22,440
$3,040
The difference in manufacturing overhead that have been applied to the Jackson
industries using plantwide rate and the departmental rates is $3,040. This
difference happens because of the different costs of overhead per DLH for the
overall cost of overhead for the plantwide rate against the differenct production
departments using the department rates.