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Departmental Overhead Rates

Lansing, Inc., provided the following data for its two producing departments:

Molding Polishing TotalEstimated overhead $400,000 $80,000 $480,000Direct labor hours (expected and actual): Form A 1,000 5,000 6,000 Form B 4,000 15,000 19,000 Total 5,000 20,000 25,000Machine hours: Form A 3,600 3,000 6,600 Form B 1,400 2,000 3,400 Total 5,000 5,000 10,000

Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 20,000 units of Form A produced and sold and 50,000 of Form B.

Required:

1. Calculate the overhead rates for each department.

Molding$fill in the blank per machine hourPolishing$fill in the blank per direct labor hour

2. Using departmental rates, assign overhead to the two products and calculate the overhead cost per unit. Round your answers to the nearest cent.

Unit Overhead CostAssigned unit overhead cost for Form A$fill in the blank per unitAssigned unit overhead cost for Form B$fill in the blank per unit

How does this compare with the plantwide rate unit cost, using direct labor hours? Relative to the plantwide rate, the cost

decreased, increased, or remained the same

for Form A and

decreased, increased, or remained the same

for Form B.

3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates. Round your answers to the nearest cent.

Unit Overhead CostForm Afill in the blank per unitForm Bfill in the blank per unit

Compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?

Relative to the plantwide rate, the cost

decreased, increased, or remained the same

for Form A and

decreased, increased, or remained the same

for Form B.

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