Vanadium Corporation is organized to produce custom metalworking goods. The company is organized into two departments: machining and assembly. Work in the machining department consists of cutting, shaping, and smoothing parts. This work is all highly automated and the company has determined that most overhead cost in the department is highly correlated with the number of hours the various machines are operated. By contrast, work in the assembly department is nearly all done manually and overhead is highly correlated with the number of direct labor hours worked. Consequently, Vanadium Corporation has opted to apply overhead to individual jobs using departmental overhead rates based on machine hours and direct labor hours respectively. Budget data for the two departments is given in the table below:
Required:
a. Determine the overhead rates that will be used to apply overhead to jobs that pass through the two departments at Vanadium Corporation.
b. Vanadium has been asked to provide a price quote for a job that will require 15 machine hours and 10 direct labor hours. What amount of overhead should be charged to this job when preparing the quoted price?

Question

Vanadium Corporation is organized to produce custom metalworking goods. The company is organized into two departments: machining and assembly. Work in the machining department consists of cutting, shaping, and smoothing parts. This work is all highly automated and the company has determined that most overhead cost in the department is highly correlated with the number of hours the various machines are operated. By contrast, work in the assembly department is nearly all done manually and overhead is highly correlated with the number of direct labor hours worked. Consequently, Vanadium Corporation has opted to apply overhead to individual jobs using departmental overhead rates based on machine hours and direct labor hours respectively. Budget data for the two departments is given in the table below:
  Required: 
a. Determine the overhead rates that will be used to apply overhead to jobs that pass through the two departments at Vanadium Corporation.
b. Vanadium has been asked to provide a price quote for a job that will require 15 machine hours and 10 direct labor hours. What amount of overhead should be charged to this job when preparing the quoted price?

Quizplus · Accepted Answer

The Answer of Vanadium Corporation is organized to produce custom metalworking goods. The company is organized into two departments: machining and assembly. Work in the machining department consists of cutting, shaping, and smoothing parts. This work is all highly automated and the company has determined that most overhead cost in the department is highly correlated with the number of hours the various machines are operated. By contrast, work in the assembly department is nearly all done manually and overhead is highly correlated with the number of direct labor hours worked. Consequently, Vanadium Corporation has opted to apply overhead to individual jobs using departmental overhead rates based on machine hours and direct labor hours respectively. Budget data for the two departments is given in the table below:
  Required: 
a. Determine the overhead rates that will be used to apply overhead to jobs that pass through the two departments at Vanadium Corporation.
b. Vanadium has been asked to provide a price quote for a job that will require 15 machine hours and 10 direct labor hours. What amount of overhead should be charged to this job when preparing the quoted price?

Vanadium Corporation Is Organized to Produce Custom Metalworking Goods