1. Name and briefly describe three overhead rate methods. (1 point) 2. Robinson,
ID: 2512898 • Letter: 1
Question
1. Name and briefly describe three overhead rate methods. (1 point)
2. Robinson, Inc estimates that overhead costs for the next year will be $3,600,000 for indirect labor, $200,000 for factory utilities, and $21,500 for depreciation on factory machinery. The company uses machine hours as its overhead allocation base. If 664,300 machine hours are planned for this next year, what is the company's plantwide overhead rate? (1 point)
3. Yeager Co. manufactures popcorn treats that go through two departments, popping and baking, before they are complete. Expected costs and activities for the two departments are shown below:
Popping
Baking
Direct labor hours
238,000 DLH
50,000 DLH
Machine hours
25,000 MH
131,500 MH
Overhead costs
$357,000
$452,800
a. Compute a departmental overhead rate for the popping department based on direct labor hours. (1 point)
b. Compute a departmental overhead rate for the baking department based on machine hours.
Popping
Baking
Direct labor hours
238,000 DLH
50,000 DLH
Machine hours
25,000 MH
131,500 MH
Overhead costs
$357,000
$452,800
Explanation / Answer
1)
a) The plantwide overhead rate method uses a single rate for allocating overhead costs to products. This rate is a volume-based measure such as direct labor hours, direct labor dollars, or machine hours.
b) The departmental overhead rate method uses multiple volume-based measures to allocate overhead costs to products.
c) Activity- based costing focuses on activities and the cost of carrying out activities. Rates based on these activities are then used to assign overhead to products in proportion to the amount of activity required to produce them.
2) Company's pllantwide overhead rate = (3600000+200000+21500)/66430 = $5.75 per machine hour.
3) a. Departmental overhead rate = (357000+452800)/(238000+50000) = $2.81 per hour.
b. Departmental overhead rate = (357000+452800)/(25000+131500) = $5.17 per hour
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