Stonebarger Fountains Manufactures Customized Fountains and Uses Two Types of Assembly

Stonebarger Fountains manufactures customized fountains and uses two types of assembly processes. Some parts of the fountains are completely assembled by labour. Other parts, such as the pump mechanisms, are made by machines. The company uses job costing, but has modified the system to reflect the different types of processes that fountains undergo. The following department overhead rates are used for the production plant:
Overhead cost pool Allocation rate
Labour assembly $25 per direct labour hour
Machine assembly $10 per machine hour
Quality testing $30 per testing hour
Resources used for Fountain #35
Direct labour hours 5.0 hours
Machine hours 2.5 hours
Testing hours 2.0 hours
If a single plantwide overhead rate were used instead of separate overhead cost pool rates, overhead would have been allocated to jobs at $56 per direct labour hour.
a)What overhead cost should be allocated to Fountain #35 using the plantwide manufacturing overhead rate?
b)What total overhead cost should be allocated to Fountain #35 using the separate process overhead rates?
c)Why do the allocated amounts in parts (a)and (b)differ?
d)Explain why Stonebarger would use three different overhead allocation bases.
e)Discuss whether increasing the number of overhead cost pools always increases the accuracy of costs allocated to jobs.