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Assume a company has two manufacturing departments $$ Assembly and Fabrication. The company considers all of its manufacturing overhead costs to be fixed costs. The first set of data below is budgeted data for the company as a whole that was estimated at the beginning of the year. The second set of data below is actual data for the company as a whole that was derived at the end of the year. The third set of data relates to one particular job completed during the year$$ Job Z$.$

Budgeted Data Assembly Fabrication

Manufacturing overhead costs $ $300,000$ $ $400,000$

Direct labor hours $25,00015,000$

Machine hours $10,00050,000$

Actual Data Assembly Fabrication

Manufacturing overhead costs $ $330,000$ $ $380,000$

Direct labor hours $27,00016,000$

Machine hours $10,50048,000$

Job Z Assembly Fabrication

Direct labor hours $10$ hours $2$ hours

Machine hours $1$ hour $7$ hours

The company is trying to decide if it should use a plantwide predetermined overhead rate based on direct labor$-$hours or departmental predetermined overhead rates based on direct labor$-$hours as the allocation base in Assembly and machine$-$hours as the allocation base in Fabrication. If the company uses the plantwide approach, by how much will it undercost or overcost Job Z compared to if it had used the departmental approach?

Multiple Choice

Undercost by $$34$

Overcost by $$34$

Overcost by $$68$

Undercost by $$68$

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