Question

Exercise 17-7 Departmental overhead rates LO P2 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 52,000 DLH 30,500 MM $732,000 Trimming 48,000 DLH 3,600 MH $592,000 11 Data for two special-order parts to be manufactured by the company in this year follow nces Part A270 9,880 units Part X320 54, 5ee units Number of units Machine hours Molding Trimning Direct labor hours Molding Trimning 5,100 MM 2,600 MH 1,020 MM 650 MH 5,500 DLH 700 DLH 2,150 DLH 3,500 DLH Required: 1. Compute a 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 Trimming 2. & 3. Determine the total overhead cost assigned to each product line using the departmental overhead rates from requirement 1, and then determine the overhead cost per unit Part A270 Activity Driver Departmental OH Rate Total Overhead Coat Molding Trimming

Answer 1

1 Department Overhead rate Molding Overhead cost Machine hour $ 24.00 Per machine Hour 732,000 $ 30,500 Trimming Overhead cost Direct Labor hour $ 12.33 Per direct labor hour 592,000 $ 48,000 Divide overhead cost by allocation base to get department overhead rate for each department. 2&3 Part A27C Molding Trimming Total Overhead Cost Units produced Overhead per unit Departmental Activity Driver OH rate 5100 $ 24.00 $ 700 $ 12.33 $ $ Total OH Cost 122,400 8,631 131,031 9800 Divide $ 13.37 Part X82B Molding Trimming Total Overhead Cost Units produced Overhead per unit Departmental Activity Driver OH rate 1020 $ 24.00 $ 3500 $ 12.33 $ $ Total OH Cost 24,480 43,155 67,635 54500 1.24 Divide $ To calculate total OH cost take number of activity driver for each department (Machine hr for molding & direct labor hr for trimming) and multiply it with OH rate calculated above. To calculate per unit OH cost divide total OH cost with number of units produced.