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

Exercise 26

Calculating Departmental Overhead Rates Using Post-Allocation Costs
Refer to Cornerstone Exercise 7.3 and solve for the allocated costs to Fabricating and Assembly using the direct method of support department cost allocation. The Fabricating Department overhead rate is based on normal activity of 82,000 machine hours. The Assembly Department overhead rate is based on normal activity of 160,000 direct labor hours.
Job 316 required six machine hours in Fabricating and four direct labor hours in Assembly. Total direct materials cost $120, and total direct labor cost was $80.
Required:
1. Calculate the overhead rate for Fabricating based on machine hours and the overhead rate for Assembly based on direct labor hours. (Round overhead rates to the nearest cent.)
2. Using the overhead rates calculated in Requirement 1, calculate the cost of Job 316.
3. What if Job 316 had required one machine hour in Fabricating and four direct labor hours in Assembly? Direct labor and direct materials costs remained the same. Calculate the new cost of Job 316.