Chapter 4 Question 3

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Departmental Overhead Rates heard that departmental overhead rates can offer significantly better cost assignments than can a plantwide rate. Mariposa has the following data for its two departments for the coming year: Required: 1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. $ per machine hour 2. Compute predetermined overhead rates for each department using machine hours. Round your answers to one decimal DepartmentADepartmentBpermachinehourpermachinehour tool (Product Y15) used 170 machine hours from Department A and 50 machine hours from Department B. Compute the overhead cost assigned to each product using the plantwide rate computed in Requirement 1. Repeat the computation using the departmental rates found in Requirement 2. Which of the two approaches gives the fairest assignment? 4. Repeat Requirement 3 assuming the expected overhead cost for Department B is $360,000. Would you recommend departmental rates over a plantwide rate