Homework Chapter 9 -
1. Why do companies commonly use direct labor-hours or direct labor cost but not the number of
units to allocate overhead?
2. Plant wide versus Department Allocation
Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the
baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to
allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 200 percent
of direct labor cost. Last year, revenue, materials, and direct labor were as follows:
Compute the profit for each product using plantwide allocation.
Maria, the manager of Department T, was convinced that tennis rackets were really more profitable
than baseball bats. Shle asked her colleague in accounting to break down the overhead costs for the
two departments. She discovered that had department rates been used, Department B would have