Toyz Manufacturing Uses Departmental Cost Driver Rates to Apply Manufacturing

question 182

Essay

Toyz Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products.Manufacturing overhead costs are applied on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department.At the beginning of 2014,the following estimates were provided for the coming year:
$\begin{array}{lrc}&\text { Machining}&\text { Assembly }\\\text { Direct labor-hours (dlh) } & 10,000 \mathrm{dlh} & 150,000 \mathrm{dlh} \\\text { Machine-hours (mh) } & 100,000 \mathrm{mh} & 5,000 \mathrm{mh} \\\text { Direct labor cost } & \$ 80,000 & \$ 720,000 \\\text { Manufacturing overhead costs } & \$ 200,000 & \$ 450,000\end{array}$
$\text { The accounting records of the company show the following data for Job } \# 897 \text { : }$

$\begin{array}{lcc}&\text { Machining}&\text { Assembly }\\\text { Direct labor-hours (dlh) } & 50 \mathrm{dlh} & 120 \mathrm{dlh} \\\text { Machine-hours (mh) } & 170 \mathrm{mh} & 10 \mathrm{mh} \\\text { Direct material cost } & \$ 3,000 & \$ 1,600 \\\text { Direct labor cost } & \$ 400 & \$ 1,500\end{array}$ Required:
a.Compute the manufacturing overhead allocation rate for each department.
b.Compute the total cost of Job #897.
c.Provide possible reasons why Toyz Manufacturing uses two different cost allocation rates.

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Definitions:

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Churn Rate

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