Answer:
a.
Factory Overhead rate
$13.75 per hour
Production department rates
Assembly = $15.5 permachine hour
Finishing = $12.0 per machine hour
b.
Plant-wide
Product A = $27.5 per unit
Product B = $13.75 per unit
Department-wide
Product A = $34.21 per unit
Product B = $10.40 perunit
c.
Departmental Method is more accurate.
Explanation:
a.
Factory overhead rates = Total Budgeted Overhead / Total Budgeted Machine Hours
Factory overhead rate = $550,000 / ( 20,000 + 20,000 ) = $13.75 per hour
Production department rates:
Assembly Department = $310,000 / 20,000 machine hours = $15.50 per machine hours
Finishing Department = $240,000 / 20,000 machine hours = $12.00 per machine hours
b.
Factory overhead cost per unit
Plantwide rate
Product A
Applied Overhead = $13.75 per machine hour x 20,000 hours = $275,000
Overhead per unit = $275,000 / 10,000units =$27.50 per unit
Product B
Applied Overhead = $13.75 per machine hour x 20,000 hours = $275,000 Overhead per unit = $275,000 / 20,000 = $13.75 per unit
Departmental
Product A
Assembly Department = $15.50 per machine hour x 15,100 machine hours = $234,050
Finishing Department = $12.00 per machine hour x 9,000 machine hours = $108,000
Total overhead = $234,050 + $108,000 = $342,050
Per unit = $342,050 / 10,000 = $34.21
Product B
Assembly Department = $15.50 per machine hour x 4,900 machine hours = $75,950
Finishing Department = $12.00 per machine hour x 11,000 machine hour = $132,000
Total = $207,950
Per unit = $207,950 / 20,000= $10.40
c.
The department rate method is more accurate than plantwide.
In plantwide method there is an overcosting of each unit of A and undercosting of each unit of B.
