Fleming Inc., provided the following dat afor its two producing departments: Pol
ID: 2376188 • Letter: F
Question
Fleming Inc., provided the following dat afor its two producing departments:
Polishing Painting Total
Estimated overhead $500,000 $100,000 $600,000
Direct Labor Hours
(expecte and actual):
Frame A 2,000 5,000 7,000
Frame B 3,000 15,000 18,000
Total 5,000 20,000 25,000
Machiene hours
Frame A 7,000 3,000 10,000
Frame B 3,000 2,000 5,000
Total 10,000 5,000 15,000
Machiene hours are used to assign the overhead of the polishing department, and direct labor hours are used to assign to the painting departemnt. there are 60,000 units of frame A produced and sold and 100,000 of frame B.
Required:
1. Calculate the overhead rates for each department
2. Using departmental rates, assign overhead to the two products and calculate the overhead cost per unit. How does this compare with the plantwide rate unit cost, using diferent labor hours?
3. What if the machine hours in polishing were 2,000 for frame A and 8,000 for frame B and the direct labor hours used in painting were 14,000 and 6,000, respectively? calculate the overhead cost per unit for each product using departamental rates, and compare with the plantwide rate unit costs calculated in requirement 2. What can you conclude from this outcome?
Explanation / Answer
Compute the activity OH rates using ABC. Form costs pools as appropriate.
Grinding & Polishing $300,000/10,000+100,000/10,000= $40 per MH
Providing Power $225,000/15,000= $15 per DLH
System Calibration $400,000/200 =$2,000 per batch
Product modification $500,000/1200 eng.hrs = $416.67 per engineering hour.
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