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Posted: June 15th, 2022
The Clash Company uses normal costing. The company has one service department (machine
The Clash Company uses normal costing. The company has one service department (machinemaintenance), and two production departments (P1 and P2). The service department allocates costs tothe production department based on machine hours. The company allocates service costs using whatthe book calls the dual rate method. In other words, the company DOES make a distinction betweenfixed and variable costs when charging service costs to the user departments. Both of the productiondepartments use direct labor hours as their basis for computing predetermined overhead rates.MachineMaintenanceBudgeted variable cost$98,000Budgeted fixed cost$140,000Budgeted machine hoursLong run avg. mach. Hrs.Budgeted variable OH costBudgeted fixed OH costBudgeted direct labor hrs.Actual variable costs$110,000Actual fixed costs$143,000Actual machine hoursActual variable OH costActual fixed OH costActual direct labor hoursDepartment P1Department P28,000 hours10,000 hours$132,300$215,00030,000 hours12,000 hours15,000 hours$108,100$139,10040,000 hours8,500 hours$130,000$212,00031,000 hours13,500 hours$110,000$140,00042,000 hoursThe departmental overhead numbers in the above tables do NOT have the services costs added intothem.1. Compute the predetermined overhead rate for P1. Round your rate to the nearest cent, ifneeded.2. At the end of the year, compute the total amount of underallocated or overallocated overhead inDepartment P1, and tell whether it is underallocated or overallocated.This quiz is worth 5 points and is due next Monday, April 18 th, by 4:00 in my office.
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