Cost 5

5-19 Plant wide

1 .In the case of plant wide department the following overheads have been allocated to the customers using machine hours

Details Machine hours 4 ,000 120 2800 1080

Overhead 308 ,600 9258 216 ,020 83322

Using the machine hours united motors will be allocated 9258 , Holden motors 216 ,020 and Leland motors 83322

2 . Allocating variable overhead using department based variable Manufacturing overhead rates

Department Overhead Basis for allocation motors Holden motor Leland motors

Design 39 ,000 Design hours 390 hours 110 x 39 ,000 p

390 11 ,000 200 x 39 ,000

390 20 ,000 80 x 39 ,000

390 8 ,000

Engineering 29 ,600 Engineering hours 370 hours 70 x 29 ,600

370 5600 60 x 29 ,600

370 4 ,800 240 x 29 ,600

370 19 ,200

Production 240 ,000 Machine hours 4000 hours 120 x 240 ,000

4 ,000 7200 2800 x 240 ,000

4000 168 ,000 1080 x 240 ,000

4000 64 ,800 23800 192800 92000

The manufacturing variable overhead allocated to each customer are united motors 23800 , Holden motors 192800 and Leland motors 92 ,000

3 . Holden motors are the customer who has been complaining about being overcharged because he was being allocated 216 , 020 instead of 192 ,800 under activity based or department based allocation . If department based allocation is used united motors will be very unhappy with the new prices as well as Leland motors will...