Question

Textra Plastics produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for this year follow. (Round "OH rate and cost per unit" answers to 2 decimal places.) Direct labor hours Machine hours Overhead costs Molding Trimming 52,000 DLH45,000 DLH 30.509 MM 3.600 MH $740,000 $600,000 Data for two special-order parts to be manufactured by the company in this year follow ences Part A270 9,800 units Part X828 54,500 units Number of units Machine hours Holding Trimine Direct labor hours Molding Trimming 5.100 2,600 MH 1.920 M 650 M 5,500 LH 2.150 DLH 700 OLM3,500 DLH Required: 1. Computea departmental overhead rate for the molding department based on machine hours and a department overhead rate for the trimming department based on direct labor hours. Molding 2. & 3. Determine the total overhead cost assigned to each producte using the departmental overhead rates from requirement 1, and then determine the overhead cost per unit Part ATC OK Rate Total Overhead Cost Molding

Answer 1

Requirement 1

Computation of departmental OH (overhead) rate for Molding deptt based on “MH (machine hours)” & departmental OH rate for trimming deptt based on “DL (direct labors) hours” is shown as follows:

Departmental OH rate (molding deptt) = Overhead costs / MH

                                                              = $740,000 / 30,500 MH

                                                              = $24.26

Departmental OH rate (trimming deptt) = Overhead costs / DL hours

                                                              = $600,000 / 48,000 DLH

                                                              = $12.50

Requirement 2 & 3

Determination of total OH cost assigned to each product and OH cost per unit.

Activity Driver Departmental OH Rate Total Overhead Cost 5100 24.26 =B2*C2 700 12.5 =B3*C3 =D2+D3 9800 =D4/D5 1 Part A27C 2 Molding 3 Trimming 4 2. Total Overhead Cost 5 Units Produced 6 3. Overhead Cost per Unit 7. 8 Part X82B 9 Molding 10 Trimming 11 2. Total Overhead Cost 12 Units Produced 13 3. Overhead Cost per Unit Activity Driver Departmental OH Rate 1020 24.26 3500 12.5 Total Overhead Cost =B9*C9 =B10*C10 =D9+D10 54500 =D11/D12

Computation of the above excel is shown below;

Activity Driver Departmental OH Rate Total Overhead Cost 5.100 $24.26 S123.726.00 700 $12.50 $8.750.00 $132.476.00 9,800 $13.52 1 Part A27C 2 Molding 3 Trimming 4 2. Total Overhead Cost 5 Units Produced 6 3. Overhead Cost per Unit 7 8 Part X82B 9 Molding 10 Trimming 11 2. Total Overhead Cost 12 Units Produced 13 3. Overhead Cost per Unit Activity Driver Departmental OH Rate Total Overhead Cost 1,020 $24.26 $24.745.20 3,500 $12.50 $43.750.00 $68,495.20 54,500 $1.26