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Garvey's Fine Furnishings manufactures upscale custom furniture. Garvey's currently uses a plantwide overhead rate based on direct labor hours to allocate its $1,450,000 of manufacturing overhead to individual jobs. However, Debbie Burger, owner and CEO, is considering refining the company's costing system by using departmental overhead rates. Currently, the Machining Department incurs $730,000 of manufacturing overhead while the Finishing Department incurs $720,000 of manufacturing overhead. Burger has identified machine hours (MH) as the primary manufacturing overhead cost driver in the Machining Department and direct labor (DL) hours as the primary cost driver in the Finishing Department. (Click the icon to view the job information.) Read the equirements Machining Finishing Job 450 Job 455 $ $ Total department overhead 730,000 720,000 Machining Finishing Plantwide overhead rate 58 58 Requirement 3. If Garvey's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455? First identify the formula, then calculate the amount of manufacturing overhead that would be allocated to the jobs if the plantwide overhead rate is used. (Round your answers to the nearest whole dollar.) Cost allocation base (estimated) = 14,600 16,000 Job 450 Job 455 x Actual use of allocation base $ = $ 5 5 = overhead rate 50 45 $ $ per mach. hour per DL hour Manufacturing overhead Requirement 4. If Garvey's uses departmental overhead rates, how much manufacturing overhead would be allocated to Job 450 and Job 455? Use the following table to calculate the amount of manufacturing overhead that would be allocated to the jobs if the departmental overhead rates are used. (Round your answers to the nearest whole dollar.) allocated 290 290

(Glick ve icon to view the job infonsiason) Rend the Requirement 3. if Garvm/w oontinues to ube the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455 ? whole dollar? Requirement 4, If Garvey' utes departmental overfinad rates, how much manufacturng overhead would be allocated to Job 450 and Job 455 ? whole dotar ? Requirements 1. Compute the plantwide overhead rate assuming that Garvey's expects to incur 25,000 total DL. hours during the year. 2. Compute departmental overhead rates assuming that Garvey's expects to incur 14,600MH in the Machining Department and 16,000DL hours in the Finishing Department during the year. 3. If Garvey's continues to use the plantwide overhead rate, how much manufacturing overhead would be allocated to Job 450 and Job 455 ? 4. If Garvey's uses departmental overhead rates, how much manufacturing overhead would be allocated to Job 450 and Job 455 ? 5. Based on your answers to Requirements 3 and 4 , does the plantwide overhead rate overcost or undercost either job? Explain. If Garvey's sells its furniture at 125% of cost, will its choice of allocation systems affect product pricing? Explain

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