Mariposa, inc., produces machine tools and currently uses a plantwide overhead rate, based on machine hours. harry whipple, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than can a plantwide rate.
mariposa has the following data for its two departments for the coming year:
department a department b
overhead cost (expected) $720,000 $180,000
normal activity (machine hours) 120,000 60,000
(1) compute a predetermined overhead rate for the plant as a whole based on machine hours.
(2) compute predetermined overhead rates for each department using machine hours.
(3) suppose that a machine tool (product x75) used 70 machine hours from department a and 170 machine hours from department b. a second machine tool (product y15) used 170 machine hours from department a and 70 machine hours from department b. compute the overhead cost assigned to each product using the plantwide rate computed in requirement 1.