discuss why departmental rates are more appropriate than plantwide rates for idaho m 641280

(Plant vs. departmental OH rates) Idaho Mechanical Systems has two departments: Fabrication and Finishing. Three workers oversee the 25 machines in Fabrication. Finishing uses 35 crafters to hand polish output, which is then run through buffing machines. Product CG9832 09 uses the following amounts of direct labor and machine time in each department:

	Fabrication Don't use plagiarized sources. Get Your Custom Essay on discuss why departmental rates are more appropriate than plantwide rates for idaho m 641280 Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! Order Essay	Finishing
Machine hours	10.00	0.30
Direct labor hours	0.02	2.00

Following are the budgeted overhead costs and volumes for each department for the upcoming year:

	Fabrication	Finishing
Budgeted overhead	$635,340	$324,000
Budgeted machine hours	72,000	9,300
Budgeted direct labor hours	4,800	48,000

a. What is the plantwide OH rate based on machine hours for the upcoming year? How much overhead will be assigned to each unit of Product CG9832 09 using this rate?

b. Idaho Mechanical’s auditors inform management that departmental predetermined OH rates using machine hours in Fabrication and direct labor hours in Finishing would be more appropriate than a plantwide rate. What would the OH rates be for each department? How much overhead would have been assigned to each unit of Product CG9832 09 using departmental rates?

c. Discuss why departmental rates are more appropriate than plantwide rates for Idaho Mechanical.

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