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Departmental Overhead Rates Mariposa, Inc., produces machine tools and currently uses a plantwide overhead rate, based on machine hours. Harry Whipple, the plant manager, has 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: Department Department A B Overhead costs $720,000 $180,000 (expected) Normal activity 120,000 60,000 (machine hours) Required: 1. Compute a predetermined overhead rate for the plant as a whole based on machine hours. $ 180,0 x per machine hour 2. Compute predetermined overhead rates for each department using machine hours. Round your answers to one decimal place. Department $ 5 x per machine hour Department $1 6 x per B machine hour 3. Suppose that a machine tool (Product X75) used 70 machine hours from Department A and 140 machine hours from Department B. A second machine tool (Product Y15) used 140 machine hours from Department A and 70 machine hours from Department B. Compute the overhead cost assigned to each product using the plantwide rate computed in Requirement 1. Product X75 Product Y15 Plantwide: $1,050 $ 1,050 Repeat the computation using the departmental rates found in Requirement 2. Product X75 Product Y15 Departmental: $ 810 x $ 1,080 x Which of the two approaches gives the fairest assignment? Departmental 4. Repeat Requirement 3 assuming the expected overhead cost for Department B is $360,000. Product Product X75 Y15 Plantwide: $ $ Departmental: 1,260 1,260 Would you recommend departmental rates over a plantwide rate? It doesn't matter which is chosen X

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