Lecture 7 Illustration Solution

Lecture 7 Illustration Solution - Lecture Illustration#1...

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Lecture Illustration #1 Plant-wide and departmental overhead rates Production depts P1 P2 Plant-wide Overhead $35,000 $42,000 $77,000 Total budgeted drivers 3,000 MHr 400 MHr 3,400 MHr 200 DLHr 4,000 DLHr 4,200 DLHr Table-2 Plant-wide approach (using DLHrs) Plant-wide approach (using DLHrs) P1 P2 Plant-wide Total budgeted overhead $77,000 Total budgeted driver 4,200 DLHr Plant-wide allocation rate $18.33 per DLHr $18.33 per DLHr $18.33 per DLHr Table-3 Departmental approach ( using DLHs as cost driver ) Departmental approach P1 P2 Plant-wide Total budgeted overhead $35,000 $42,000 Total budgeted driver 200 DLHr 4,000 DLHr Departmental allocation rate $175 per DLHr $10.50 per DLHr Choose the most appropriate cost driver for each departments to complete Table-4 Notice that P1 is "machine intensive" and P2 is "labour intensive" . What does this imply for choice of driver? Departmental approach using alternative drivers P1 P2 Plant-wide Total budgeted overhead $35,000 $42,000 Total budgeted driver 3,000 MHr 4,000 DLHr Departmental allocation rate $11.67 per MHr $10.50 per DLHr
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