show all work WIT Facilities expects to incur dollar200,000 in overhead costs th

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WIT Facilities expects to incur dollar200,000 in overhead costs this coming year. dollar200,000 in the Snow removal department and dollar600,000 in the Quality Control department. Total annual direct labor costs are expected to be dollar160,000. The Snow Removal department expects to use 25,000 machine hours, and the Quality Control department plans to utilize 50,000 hours of direct labor time for the year. (a) Assume NAT allocates overhead costs with the plantwide approach, and direct labor cost is the allocation base. Calculate the rate used by the company to allocate overhead costs. Equation: Numbers for calculation Answer: show all work

Explanation / Answer

Solution-a

The plantwide rate is calculated as follows:

Predetermined overhead rate=Estimated overhead costs/Estimated activity in allocation base

Predetermined overhead rate=$800,000/$160,000=$5 per $1 in direct labor cost (or 500 percent of direct labor cost)

Solution-b

The department rates are calculated using the same formula as the plantwide rate. However, overhead costs and activity levels are estimated for each department rather than for the entire company, and two separate rates are calculated:

Snow Removal department=$200,000/25,000 machine hours=$8 per machine hour

Quality Control department=$600,000/50,000 direct labor hours=$12 per direct labor hour

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