Valley Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine hours in the Machining Department and on the basis of direct labour hours in the Assembly Department. The following estimates were provided at the beginning of the current year:

Required:
a. Compute the manufacturing indirect cost allocation rate for each department.
b. Compute the total cost of Job 922.
c. Provide possible reasons why Valley Manufacturing uses predetermined rather than actual indirect manufacturing cost overhead rates.

Question

Valley Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine hours in the Machining Department and on the basis of direct labour hours in the Assembly Department. The following estimates were provided at the beginning of the current year:
  
Required:
a. Compute the manufacturing indirect cost allocation rate for each department.
b. Compute the total cost of Job 922.
c. Provide possible reasons why Valley Manufacturing uses predetermined rather than actual indirect manufacturing cost overhead rates.

Quizplus · Accepted Answer

The Answer of Valley Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine hours in the Machining Department and on the basis of direct labour hours in the Assembly Department. The following estimates were provided at the beginning of the current year:
  
Required:
a. Compute the manufacturing indirect cost allocation rate for each department.
b. Compute the total cost of Job 922.
c. Provide possible reasons why Valley Manufacturing uses predetermined rather than actual indirect manufacturing cost overhead rates.

Valley Manufacturing Uses Departmental Cost Driver Rates to Apply Manufacturing