Plantwide versus Department Overhead Rates

Don’t tell me we’ve lost another bid!” exclaimed Sandy Kovallas, president of Lenko Product, Inc. “I’m afraid so,” replied Doug martin the operations vice president. “One of our competitors underbid us by about $10,000 on the Hastings job.” I just can’t figure it out.” Said Kovallas. “it seems we are either too high to get the job or too low to make any money on half the jobs we bid anymore. What’s happened?”

Lenko Products manufactures specialized goods to customers’ specifications and operates a job-order costing system. Manufacturing overhead cost applied to jobs on the basis of direct labor cost. The following estimates were made at the beginning of the year.

Department

Cutting Machining Assembly Total Plant
Direct labor $300,000 $200,000 $400,000 $900,000
Manufacturing overhead $540,000 $800,000 $100,000 $1,440,000

Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows:

Department

Cutting Machining Assembly Total Plant
Direct materials $12,000 $900 $5,600 $18,500
Direct labor $6,500 $1,700 $13,000 $21,200
Manufacturing Overheard ?? ?? ?? ??

The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs.

Required:
1. Assuming the use of a plantwide overheard rate:
a) Compute the rate for the current year.
b) Determine the amount of manufacturing overhead cost that that would have been applied to the Hastings job.

2. Suppose that instead of using a plantwide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions:
a) Compute the rate for each department for the current year.
b) Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job.

3. Explain the difference between the manufacturing overhead that would have been applied ot the Hastings job using the plantwide rate in question 1(b) and using the department rates in question 2(b).

4. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost(direct materials, direct labor, and applied overhead). What was the company’s bid price on the Hastings job? What would the bid price have been if departmental overhead rates had been used to apply overhead cost?

5. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year:

Department

Cutting Machining Assembly Total plant
Direct materials $760,000 $90,000 $410,000 $1,260,000
Direct labor $320,000 $210,000 $340,000 $870,000
Manufacturing overhead $560,000 $830,000 $92,000 $1,482,000

Compute the underapplied or overapplied overhead for the year (a) assuming that a plantwide overhead rate is used, and (b) assuming that department overhead rates are used.

Get assignment help

Quality Assignments Help Website

Cost of your order

Pages
{{total || ""}}

Why Choose Us

Top Quality and Well-Researched Papers

We ensure that all your instructions are followed to the letter. You are able to choose the level of interest; professional, college, or high school. We will assign a writer who will cover all your specifications.

Professional and Experienced Academic Writers

We have a team of well trained and experiences assignment writers who are PhD and master’s holders. Our writers are can handle more than 91 disciplines.

Free Unlimited Revisions

If your assignment is not covered to your expectation, you can send your order for revision. The order should be submitted before 10 days elapses for review You can contact our support team or login to your personal account to submit your request.

100% Money-Back-Guarantee

We ensure on-time delivery of your papers. For clarification purpose, we may contact you regarding deadline extension. In case you cannot provide us with more time, we guarantee a 100% refund.

Originality & Confidentiality

We use professional tools to ensure all assignment help documents you receive are free of plagiarism. Our editors ensure optimum review of all quotations in the text. We also ensure confidentiality in our service delivery.

24/7 Customer Support

Our team of experts is available 24/7 to ensure that you are provided with the top customer experience. Any time you need assignment help, you can reach us and get the best experience with ours services.

Our Services

You don’t have to struggle with your papers. You need ample sleep; our writers will cover you. We provide writing services in all disciplines.

Essays

Essay Writing Services

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

Admissions

Admission and Business Papers

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

Editing

Editing and Proofreading

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

Coursework

Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.