Question 1 (10 marks) Western Designs manufactures unique furniture tor hotels. They use a job costing...

 

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Question 1 (10 marks) Western Designs manufactures unique furniture tor hotels. They use a job costing system where manufacturing overhead is applied based on direct labour costs. There are three departments in the company, Design, Milling, and Upholstery. Below are the labour and overhead estimates in total and by department. Based on the estimates for the vear, the plant wide overhead rate woujd be 160% of Direct Labour cost. Total Design Milling $1.800,000 S 600.000 S 400,000 Manufacturing Oerhead $2,8B0,000 $1,080,000 S1,600,000 $200,000 Upholstery S800,000 Direct Labour Materials and Labour costs for a new job, Job 210, are shown below. Direct Materials Direct Labour $37,000 $42,400 Total Design Milling $24.000 $13.000 $1,800 $3,400 $11,200 $26,000 Required: a) What would be the overhead rate for each department based on estimated Direct Labour costs and the estimated Manufacturing Overhead costs for the year? b) What is the Total Cost of Job 210 it the overhead rates applied to Job 210 are based on the overhead rate for each department and not the plant wide overhead rate? c) What is the Total Cost of Job 210 if a plant wide overhead rate was applied to Job 210 instead of the departmental overhead rates? d) In your opinion, is it better to use a plant wide overhead rate to apply overhead to each job or to use departmental overhead rates to apply overhead to each job? Explain your answer. Question 2 (4 marks) Required: Answer the folowing questions: a) What estimate used in process costing is determined by a production manager? b) Explain how this estimate impacts the numbers shown on the balance sheet and on the income statement. c) Why might a manager manipulate this estimate? . Question 1 (10 marks) Western Designs manufactures unique furniture tor hotels. They use a job costing system where manufacturing overhead is applied based on direct labour costs. There are three departments in the company, Design, Milling, and Upholstery. Below are the labour and overhead estimates in total and by department. Based on the estimates for the vear, the plant wide overhead rate woujd be 160% of Direct Labour cost. Total Design Milling $1.800,000 S 600.000 S 400,000 Manufacturing Oerhead $2,8B0,000 $1,080,000 S1,600,000 $200,000 Upholstery S800,000 Direct Labour Materials and Labour costs for a new job, Job 210, are shown below. Direct Materials Direct Labour $37,000 $42,400 Total Design Milling $24.000 $13.000 $1,800 $3,400 $11,200 $26,000 Required: a) What would be the overhead rate for each department based on estimated Direct Labour costs and the estimated Manufacturing Overhead costs for the year? b) What is the Total Cost of Job 210 it the overhead rates applied to Job 210 are based on the overhead rate for each department and not the plant wide overhead rate? c) What is the Total Cost of Job 210 if a plant wide overhead rate was applied to Job 210 instead of the departmental overhead rates? d) In your opinion, is it better to use a plant wide overhead rate to apply overhead to each job or to use departmental overhead rates to apply overhead to each job? Explain your answer. Question 2 (4 marks) Required: Answer the folowing questions: a) What estimate used in process costing is determined by a production manager? b) Explain how this estimate impacts the numbers shown on the balance sheet and on the income statement. c) Why might a manager manipulate this estimate? .

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1 a Departmental absorption rates Estimated manufacturing overheads Estimated direct labor costs Ove... View the full answer