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:

Retail Sales

These are transactions involving the sale of goods directly to the end consumer for personal, non-business use.

Business Activities

Actions undertaken by a company in pursuit of its commercial, operational, or financial objectives.

Make Deposit

The act of placing money into a financial account, such as a bank account, typically recorded in the company's cash receipts process.

Purchase Order

A document issued by a buyer to a seller with details about the purchase, including types of products, quantities, and prices, serving as a legally binding agreement prior to the transfer of goods.