Clearview Display Company Manufactures Display Cases to Be Sold to Retail

question 194

Essay

Clearview Display Company manufactures display cases to be sold to retail stores.The cases come in three sizes-Large,Medium,and Small.Currently,Clearview Display Company uses a single plant-wide overhead rate to allocate its $7,141,100 of annual manufacturing overhead.Of this amount,$1,875,000 is associated with the Large Case line,$2,992,500 is associated with the Medium Case line,and $2,273,000 is associated with the Small Case line.Clearview Display Company is currently running a total of 37,000 machine hours: 12,500 in the Large Case line,13,300 in the Medium Case line,and 11,200 in the Small Case line.Clearview 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:

Entrepreneurial Hobby

An activity or interest pursued outside one's regular occupation that involves creating or managing ventures with a growth and profit potential.

B2B

Business-to-business, a type of transaction between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler and retailer.

Small Business Sector

The segment of the economy composed of independently owned companies that have fewer employees and lower revenue than larger corporations.

Traditional Distributor

A business that purchases products from manufacturers and sells them to retailers or end consumers, typically without significant alteration.