Western Mechanical produces three products (Sequence, Forward, and Revolution) that are used in the heavy manufacturing industry. The company uses three activities to produce these products: cutting, assembly, and finishing. In turn, the three activities use four overhead resources: indirect labor, production labor, machine 1, and machine 2.  

Indirect labor workers are paid a salary of $55,000 per year. The indirect labor workers work 242 days each year. The workday is 8 hours, but each day, indirect labor workers are given a 15-minute break in the morning, a 15-minute break in the afternoon, and 30 minutes for lunch. 

The production labor workers are paid a salary of $80,000 per year. The production workers work 242 days each year. The workday is 8 hours, but each day, production labor workers are given a 15-minute break in the morning, a 15-minute break in the afternoon, 15 minutes of quality control training, and 30 minutes for lunch. 

Machine 1 has an annual cost of $250,000 and a practical capacity of 2,400 hours. Machine 2 has an annual cost of $365,000 and a practical capacity of 2,900 hours. The following table identifies the hours of overhead resources used per hour of each activity:

The following table identifies the hours of each activity each product uses: 

Required 

(a) Compute the capacity cost rates for each of the four resources. 

(b)Compute the overhead cost applied to each product. 

(c) If planned production is Sequence—150 units, Forward—110 units, and Revolution—180 units, how many production workers and indirect workers will be required? Workers must be hired for the entire year; no partial worker hiring is permitted. 

(d) If planned production is Sequence—150 units, Forward—110 units, and Revolution—180 units, how many hours of machine 1 and how many hours of machine 2 will be required? (e)If planned production is Sequence—150 units, Forward—110 units, and Revolution—180 units, what is the total expected overhead cost that will be incurred, and what is the total expected overhead that will be applied?  

Transcribed Image Text:

RESOURCE Indirect labor..... Production labor. Machine 1..... Machine 2. ACTIVITY RESOURCE USE CUTTING ASSEMBLY FINISHING 4.00 5.60 0.80 1.00 5.10 4.40 0.75 1.10 6.20 2.30 1.20 1.40