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?

---

Definitions:

Operating Income

Earnings before interest and taxes (EBIT), a measure of a company's profit from operations before interest expenses and taxes have been deducted.

Paid-In Capital

The amount of capital "paid in" by investors during common or preferred stock issuances, including the par value of the shares and amounts over par value.

Gain Or Loss

The financial result that occurs when the selling price of an asset differs from its original purchase price or adjusted basis.

Accrued Interest

Interest that has been earned but not yet received or paid, reflecting the cost of borrowing or the earnings on interest-bearing assets over a period.