Exercise 15-5 Duggan Company applies manufacturing overhead to jobs on the basis

Question

Exercise 15-5 Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $325,780 for the year, and machine usage is estimated at 125,300 hours. For the year, $350,103 of overhead costs are incurred and 132,400 hours are used. (a) Compute the manufacturing overhead rate for the year. (Round answers to 2 decimal places, e.g. 1.25.) Manufacturing overhead rates $ per machine hour (b) The parts of this question must be completed in order. This part will be available when you complete the part above.

Exercise 17-1 Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations. Standard Custom Direct labor costs $53,000 $108,000 Machine hours 1,190 1,500 Setup hours 110 440 Total estimated overhead costs are $308,800. Overhead cost allocated to the machining activity cost pool is $196,400, and $112,400 is allocated to the machine setup activity cost pool. (a) Compute the overhead rate using the traditional (plantwide) approach. (Round answers to 2 decimal places, e.g. 12.25%.) Predetermined overhead rate % of direct labor cost (b) The parts of this question must be completed in order. This part will be available when you complete the part above. (c) The parts of this question must be completed in order. This part will be available when you complete the part above.

Explanation / Answer

Duggan Company:

a) Manufacturing OH rate = $325,780/125300 = $2.6 per machine hour.

b) Requirement not clear; is incomplete.

Wilkins Inc:

a) Overhead rate using traditional - plant wide approach = $308,800/53000+$108000 = $191.8% of direct labor cost.

Other parts' requirement not specified.

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