Business, 08.03.2021 19:20 biancasamadp3usfw
Ko Inc. has two departments and uses a plant-wide predetermined overhead rate (POHR) using direct labor cost (DLC) as the allocation base to apply manufacturing overhead to the company's jobs. The owner of the company considers switching to departmental predetermined overhead rates that are based on direct labor hours (DLHs) in Dept. A and machine-hours (MHs) in Dept. B. Note that actual direct labor cost per hour is $12. At the beginning of the year, the company made the following estimates:
Estimates: Dept. A Dept. B
Direct labor costs (DLC) $26,000 $13,700
Direct labor hours (DLHs) 2,000 1,200
Machine-hours (MHS) 1,800 3,200
Manufacturing overhead $34,600 $44,800
Assuming the information below for the two jobs, what is the impact on Job #22 of using departmental predetermined overhead rates?
Actual Results: Dept. A Dept. B
Job#12 DLHS 260 180
MHS 140 240
DLHS 160 130
Job#22 MHS 220 280
a. Applied manufacturing overhead will be $2702 lower
b. Applied manufacturing overhead will be $272 lower
c. Applied manufacturing overhead will be $3060 lower
d. Applied manufacturing overhead will be $508 lower
e. There is no difference whether the plant-wide or departmental rates are used
Answers: 2
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