Plantwide vs. Departmental Overhead Rate Ryan Corporation manufactures auto steering systems. Prime cost and machine time estimates for one unit of the product for the year follow:[LO 4-4]Direct materials $200Direct labor ($12/hour) $300Machine hours 20Job # Direct Materials Direct Labor Overhead TotalT114 $31,500 $16,250 $28,750 $76,500This product requires 15 hours of direct labor in Department A and 10 hours in Department B. Also,it requires 5 machine hours in Department A and 15 machine hours in Department B. Using output asthe activity, the factory overhead costs estimated in these two departments follow:A BVariable cost $150,000 $ 80,000Fixed cost 94,000 163,000Management expects the firm to produce 1,000 units during the year.Required1. Assume that factory overhead was applied on the basis of direct labor hours. Compute the predetermined plantwide factory overhead rate.2. If factory overhead were applied on the basis of machine hours, what would be the plantwide overheadrate?3. If the company produced 1,000 units during the year, what was the total amount of applied factory overhead in each department in requirements 1 and 2?4. If you were asked to evaluate the performance of each department manager, which allocation basis (costdriver) would you use? Why?5. Compute the departmental overhead rate and amount of applied overhead for Department A using directlabor hours as the allocation base and for Department B using machine hours as the allocation base.
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Plantwide vs. Departmental Overhead Rate Ryan Corporation manufactures auto steering systems. Prime cost and machine time estimates for one unit of the product for the year follow:
[LO 4-4]
Direct materials $200
Direct labor ($12/hour) $300
Machine hours 20
Job # Direct Materials Direct Labor Overhead Total
T114 $31,500 $16,250 $28,750 $76,500
This product requires 15 hours of direct labor in Department A and 10 hours in Department B. Also,
it requires 5 machine hours in Department A and 15 machine hours in Department B. Using output as
the activity, the
A B
Variable cost $150,000 $ 80,000
Fixed cost 94,000 163,000
Management expects the firm to produce 1,000 units during the year.
Required
1. Assume that factory overhead was applied on the basis of direct labor hours. Compute the predetermined plantwide factory overhead rate.
2. If factory overhead were applied on the basis of machine hours, what would be the plantwide overhead
rate?
3. If the company produced 1,000 units during the year, what was the total amount of applied factory overhead in each department in requirements 1 and 2?
4. If you were asked to evaluate the performance of each department manager, which allocation basis (cost
driver) would you use? Why?
5. Compute the departmental overhead rate and amount of applied overhead for Department A using direct
labor hours as the allocation base and for Department B using machine hours as the allocation base.
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