At the PPF$,$ Manufacturing Overhead is applied using an application rate based on the total actual manufacturing overhead for the month divided by the total number of units produced. This rate is then applied to each job by multiplying the rate times the units for each job.

The Paper Products Factory targets its selling price at $115\%$ of product cost.

The cost information and a partially completed job cost sheet is available for your use in completing Case Study $8\mathrm{.}1$ Part B$.$ Actual levels of production and total manufacturing costs for the month of September are included on Exhibit $2$ Costs and Cost Assumptions. A partially completed job cost sheet is included in Exhibit $3$ Partially Completed Job Cost Sheet.

Trace the direct material and direct labor amounts used for each job and mark it on the Job Cost sheet. Your job consisted of $15$ Hats and $10$ Chains. The amounts of materials for the job can be found on the Materials Requisition Report $($not included$)$ and the Labor is found on the Labor time records $($not included$).$ These amounts have been input onto the Job Cost Sheet for you. See Exhibit $3$ Partially Completed Job Cost Sheet.

Using one overhead cost pool and units as the cost driver, allocate the overhead to each job.

Why is the process of allocating overhead different from tracing direct material and direct labor costs?

Complete the Job Cost sheets by identifying the total product cost for each job. Next compute the cost for a unit of paper hats and a unit of paper chain.

What do you think is the cause of the increase in unit costs for paper hats?

Matt Brady has asked you to help him identify some other methods for allocating overhead in the determination of product cost. Identify at least two other possible ways of allocating the overhead to each job. Recalculate the product cost and targeted selling price of each job and each unit using the two methods of allocating overhead identified in $($e$).$

What are the advantages and disadvantages of the methods identified? Which method would you recommend?

Write a memo to Brian Clark summarizing your findings and recommendations.