Murphy's Machine Works Manufactures Custom Equipment

question 138

Essay

Murphy's Machine Works manufactures custom equipment. Sector's Machine Works currently uses a plantwide overhead rate, based on direct labour hours, to allocate its $2,500,000 of manufacturing overhead to individual jobs.
Murphy's plant completed Jobs 600 and 601 on July 15. Both jobs incurred a total of 9 DL hours throughout the entire production process. Job 600 incurred 5 MH in the Machining Department and 6 DL hours in the Assembly Department (the other 3 DL hour occurred in the Machining Department). Job 601 incurred 8 MH in the Machining Department and 7 DL hours in the Assembly Department (the other two DL hours occurred in the Machining Department).
Requirements
1. Compute the plantwide overhead rate, assuming Murphy expects to incur 50,000 total DL hours during the year.
2. How much manufacturing overhead would be allocated to each job if Murphy uses the plant wide rate?

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Definitions:

Voting Shares

Shares that endow the holder with the right to vote on matters at shareholders' meetings and to elect the directors of the company.

Consolidated Balance Sheet

A financial statement that presents the assets, liabilities, and equity of a parent company and its subsidiaries as if the group was a single entity.

Fair Market Value

The price that an asset would sell for on the open market between willing and knowledgeable parties.

Book Value

The net value of a company's assets as recorded on its balance sheet, calculated as total assets minus intangible assets (patents, goodwill) and liabilities.