Provincial Company is deciding which of three approaches it should use to apply overhead to products. Information for each approach is provided in the following.

€¢ One plantwide rate. The predetermined overhead rate is 120 percent of direct labor cost.

€¢ Department rates. The Machining department uses a rate of $55 per machine hour, and the Assembly department uses a rate of $35 per direct labor hour.

€¢ Activity-based costing rates. Three activities were identified and rates were calculated for each activity.

Required:

a. Direct labor costs for the year totaled $80,000. Using the plantwide method, calculate the amount of overhead applied to products and make the appropriate journal entry.

b. During the year, the Machining department used 1,000 machine hours, and the Assembly department used 1,200 direct labor hours. Using the department method, calculate the amount of overhead applied to products and make the appropriate journal entry.

c. During the year, 900 purchase requisitions were processed, 1,300 production setups were performed, and 400 products were inspected. Using the activity-based costing approach, calculate the amount of overhead applied to products, and make the appropriate journal entry.

Transcribed Image Text:

Purchase requisitions $15 per requisition processed $50 per setup $70 per inspection Production setup Quality control