Question

Flexible Manufacturers, Inc., produces small batches of customized products. The accounting system is set up to allocate plant overhead to each job using the following production cost pools and overhead allocation rates:
Labor-paced assembly ....... $25 per direct labor hour
Machine-paced assembly ..... $18 per machine hour
Quality testing .......... $2 per unit

Actual resources used for Job 75:
Direct labor hours ...... 3 hours
Machine hours ........ 1.25 hours
Number of units ...... 36 units
The plant accountant wants to simplify the cost accounting system and use a plant-wide rate. If the preceding costs are grouped into a single cost pool and allocated based on labor hours, the rate would be $35 per direct labor hour.

REQUIRED
A. What cost should be allocated to Job 75 using the plant-wide overhead rate?
B. What cost should be allocated to Job 75 using the production cost pool overhead rates?
C. Why do the allocated amounts in parts (A) and (B) differ?
D. Which method would you recommend? Explain your choice.



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  • CreatedJanuary 26, 2015
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