(Solved) Valley Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to ...

Valley Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine hours in the Machining Department and on the basis of direct labour hours in the Assembly Department. The following estimates were provided at the beginning of the current year:

      Machining   Assembly
   Direct labour hours   15,000 dlh   60,000 dlh
   Machine hours   120,000 mh   4,000 mh
   Direct labour cost   $450,000   $1,200,000
   Manufacturing overhead costs   $360,000   $120,000

The accounting records of the company show the following data for Job #922:

      Machining   Assembly
   Direct labour hours   50 dlh   120 dlh
   Machine hours   170 mh   10 mh
   Direct material cost   $3,900   $1,800
   Direct labour cost   $1,650   $2,280

Required:
a.   Compute the manufacturing indirect cost allocation rate for each department.
b.   Compute the total cost of Job #922.
c.   Provide possible reasons why Valley Manufacturing uses predetermined rather than actual    indirect manufacturing cost overhead rates.

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Valley Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to ...

Cost Accounting: A Managerial Emphasis, Canadian Edition

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