Jefferson Company Expects to Incur $450,000 in Manufacturing Overhead Costs

question 119

Essay

Jefferson Company expects to incur $450,000 in manufacturing overhead costs during the current year.Other budget information follows:
$$\begin{array} { | l | r | r | r | } \hline & \text { Department A } & \text { Department B } & \text { Department C } \\\hline \text { Direct labor hours } & 15,000 & 5,000 & 20,000 \\\hline \text { Machine hours } & 8 , 0 0 0& 10,000 & 12,000 \\\hline\end{array}$$ Required:
1)Use direct labor hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead cost for each department.
2)Use machine hours as the cost driver to compute the allocation.Determine the amount of budgeted overhead cost for each department.
3)Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours.If overhead is allocated based on direct labor hours,how much overhead would be allocated to this product?
4)Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours.If overhead is allocated based on machine hours,how much overhead would be allocated to this product?

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Definitions:

Decision Tree Analysis

An analytical method that uses a decision tree structure to evaluate the outcomes of different decision paths, incorporating branches for uncertainty, resource costs, and potential returns.

NPV Outcomes

The range of potential net present values resulting from differing scenarios in capital budgeting to evaluate investment project profitability.

Probability Distribution

A mathematical function that provides the probabilities of occurrence of different possible outcomes for an experiment.

NPV

The calculation of the current value of all future cash flows generated by a project, after accounting for the initial capital expenditure.