High Rise Display Company Manufactures Display Cases to Be Sold

question 86

Essay

High Rise Display Company manufactures display cases to be sold to retail stores.The cases come in three sizes: Large,Medium,and Small.Currently,High Rise Display Company uses a single plant-wide overhead rate to allocate its $3,357,800 of annual manufacturing overhead.Of this amount,$820,000 is associated with the Large Case line,$1,276,800 is associated with the Medium Case line,and $1,261,000 is associated with the Small Case line.Clearview Display Company is currently running a total of 33,000 machine hours: 10,000 in the Large Case line,13,300 in the Medium Case line,and 9,700 in the Small Case line.High Rise Display Company uses machine hours as the cost driver for manufacturing overhead costs.
Required:
a.Calculate the plant-wide manufacturing overhead rate.
b.Calculate the departmental overhead rate for each of the three departments listed.
c.Which product line(s)have been overcosted by using the plant-wide manufacturing overhead rate? By how much per machine hour? Which product line(s)have been undercosted by using the plant-wide manufacturing overhead rate? By how much per machine hour?

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Definitions:

Social Security

A government program that provides financial assistance to individuals during retirement, disability, or upon the death of a parent or spouse.

Medicare

A federal healthcare program primarily for people aged 65 and older, providing coverage for various medical services.

FICA Tax

Federal Insurance Contributions Act tax used to finance federal programs for old-age and disability benefits (social security) and health insurance for the aged (Medicare).

Payroll Tax

Taxes imposed on employers and employees, calculated as a percentage of the salaries that employers pay to their staff.