Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen

Exercise 8

Departmental Overhead Rates
Lansing, Inc., provided the following data for its two producing departments:

Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 30,000 units of Form A produced and sold and 50,000 of Form B.
Required:
1. Calculate the overhead rates for each department.
2. Using departmental rates, assign overhead to the two products and calculate the overhead cost per unit. How does this compare with the plantwide rate unit cost, using direct labor hours?
3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates, and compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?