Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments --Molding and Fabrication. It started, completed, and sold only two jobs during March- Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Estimated total machine-hours used Estimated total fixed manufacturing overhead Estimated variable manufacturing overhead per machine-hour Molding Fabrication Total 2,500 1,500 4,000 $12,250 $16,350 $28,600 $ 2.30 $ 3.10 Job P $22,000 $28,200 Job $12,500 $11,100 Direct materials Direct labor cost Actual machine-hours used: Molding Fabrication Total 2,600 1,500 4,100 1,700 1,800 3,500 Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month. Required: For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-houras the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. 1. What was the company's plantwide predetermined overhead rate? (Round your answer to 2 decimal places.)

Answer 1

Plantwide Predetermined Overhead Rate

It is the overhead rate which normally uses direct labor hours as its base for allocating its total manufacturing overhead cost to jobs. It is calculated in two steps. First we need to calculate Total manufacturing overhead cost which is calculated using the equation:

Y = a + bx

Here:

Y = the estimated total manufacturing overhead cost

a = the estimated total fixed manufacturing overhead cost

b = the estimated variable manufacturing overhead cost per unit of the allocation base

X = the estimated total amount of the allocation base

The second step is calculation of predetermined overhead rate which is calculated as:

Predetermined Overhead Rate =

Estimated total manufacturing overhead cost / Estimated total amount of the allocation base

Calculation of Total manufacturing overhead cost

Calculation of Total manufacturing overhead cost (Y):

Estimated total fixed manufacturing overhead cost (a) = $28,600

Estimated variable manufacturing overhead cost per machine hour for Molding (b₁) = $2.30

Machine hours required to support estimated production for Molding (X₁₎ = 2,500

Estimated variable manufacturing overhead cost per machine hour for Fabrication (b₂) - $3.10

Machine hours required to support estimated production for Fabrication (X₂) - 1,500

Total manufacturing overhead cost (Y)

Y = a + b₁ X₁, + b₂, X₂,

Y = $28,600 + ($2.30x 2,500)+($3.10x1,500)

Y = $28,600+$5,750+$4,650

Y = $39,000

Total Manufacturing Overhead is $39,000

Calculation of Pre-determined Overhead Rate

It is calculated by dividing the estimated total manufacturing overhead cost by the estimated total amount of the allocation base.

Predetermined Overhead Rate

= Estimated total manufacturing overhead cost / Estimated total amount of the allocation base

= $39,000 / 4,000 = $9.75

The Pre-determined Overhead Rate is $9.75

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