Farmer\'s Fine Furnishings manufactures upscale custom furniture. Farmer\'s curr

Question

Farmer's Fine Furnishings manufactures upscale custom furniture. Farmer's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,290,000 of manufacturing overhead to individual jobs. However, Deana Howards, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $870,000 of manufacturing overhead while the Finishing Department incurs $420,000 of manufacturing overhead. Deana has identified machine hours (MH) as the primary manufacturing overhead cost driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing Department (Click the icon to view the job information.) Read the reauirements Requirement 1. Compute the plantwide overhead rate assuming that Farmers expects to incur 30,000 total Du hours during the year O First identify the formula, then compute the rate (Round your ariswer to the nearest hole dollar) Plantwide overhead rate 12900d 30000 43 as to inesir 14 500 MH in the Machining Department and 17,500 DL hours in

Explanation / Answer

Requirement 1

Requirement 2  

Requirement 3

Requirement 4

120

(2*60)

420

(7*60)

96

(4*24)

72

(3*24)

Requirement 5

The single plantwide overhead undercosts job 450 by $1(215-216) and undercosts Job 455 by $277 (215-492)

Since farmer sets its sales price at 125% of cost, the job cost is affected by the allocation system it uses, its sales price will be affected by the allocation system it uses.

Total manufacturing overhead / cost Allocation base (Estimated) = plantwide overhead rate 1290000 / 30000 = $43

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