Walters Products manufactures its products in two separate departments: machinin

Question

Walters Products manufactures its products in two separate departments: machining and assembly. Total manufacturing overhead costs for the year are bucgeted at $1.02 million. Of this amount, the Machining Department incurs $620,000 (primarily for machine operation and depreciation) while the Assembly Department incurs $400,000. Walters Products estimates it will incur 8,000 machine hours (all in the Machining Department) and 16,500 direct labour hours (2,000 in the Machining Department and 14,500 in the Assembly Department) during the year Walters Products currently uses a plantwide overhead rate based on direct labour hours to allocate overhead. However, the company is considering refining its overhead allocation system by using departmental overhead rates. The Machining Department would allocate its overhead using machine hours (MH), but the Assembly Department would allocate its overhead using direct labour (DL) hours The following chart shows the machine hours (MH) and direct labour (DL) hours incurred by Jobs 500 and 501 in each production department: (Click the icon to view the machine hours and direct labour hours incurred by each department.) Both Jobs 500 and 501 used $2,200 of direct materials. Wages and benefits total $35 per direct labor hour. Walters Products prices its products at 110% of total manufacturing costs. Requirement 1. Compute Walters Products' current plantwide overhead rate Begin by detemining the formula, then compute the rate. (Round your answer to the nearest whole dollar.) Data Table s Plantwide overhead rate per DL hour Machining Assembly Requirement 2. Compute refined departmental overhead rates. Determining the formula, then compute the rate. (Round your answers to the nearest dollar.) Job 500.. 10 MH 12 DL hours DL hours Department allocation rate Job 501... 20 MH 12 DL hours machine hour 3 DL hours Assembly DL hour Requirement 3. Which job (Job 500 or Job 501) uses more of the company's resources? Explain. Print Done | of the company's resources. Job 500 uses | Job 501 machine hours than the other job. The accounting system should show that one job actually the other

Explanation / Answer

1.Plantwide Overhead rate= total Overhead/ total direct labour hrs= $1020000/16500=$61.82 =$62 per labour hr

2.

Machining= $620000/8000=$77.5=$78 per machine hr

Assembly=$400000/16500=$24.24= $24per labour hr

3.

Job 501 uses more of company's resources.

It uses 20 MH whereas job 500 uses 10 MH.

Job 501uses 10 more MH than the Job 500.

4.

5.

Here MH= machine hrs

DL= Direct Labour hrs

Since the question involves many subparts, it is not solved further. Inconvenience is regretted.

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Job 500 job 501 Direct labour hrs 15 15 *Rate as per 1. $62 $62 Overhead allocation $930 $930

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