Made Well Tool,Inc

question 110

Essay

Made Well Tool,Inc.,a manufacturer of cutting tools,divided its manufacturing process into two Departments - Machining and Finishing.The estimated overhead costs for the Machining and Finishing departments amounted to $400,000 and $1,000,000,respectively.The company produces two types of tools - Standard and Deluxe.The total estimated labor hours for the year were 4,000,and total estimated machine hours were 2,000.The Machining department is mechanized,whereas the Finishing department is labor oriented.Calculate departmental predetermined overhead allocation rates.
$$\begin{array} { | l | r | r | } \hline & { \textbf { Machining } } & \textbf { Finishing } \\\hline & \text { Machine hours } & \text { Labor hours } \\\hline \textbf { Standard } & 500 & 1,800 \\\hline \textbf { Deluxe } & \underline { 1,500 } & \underline { 2,200 } \\\hline & \underline { 2,000 } & \underline { 4,000 } \\\hline\end{array}$$

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Definitions:

Interest Rates

The percentage of a sum of money charged for its use, typically expressed as an annual percentage rate.

Par Value

The face or nominal value of a bond, stock share, or coupon, as specified by the issuer.

Coupon Rate

Annually, the interest earned on a bond represented as a percentage of its face value.

Premium Bond

Bond prices and interest rates are inversely related; that is, they tend to move in the opposite direction from each other. A fixed-rate bond will sell at par when its coupon interest rate is equal to the going rate of interest, rd. When the going rate of interest is above the coupon rate, a fixed rate bond will sell at a “discount” below its par value. If current interest rates are below the coupon rate, a fixed rate bond will sell at a “premium” above its par value.