1. Compute the departmental overhead rates using machine hours as the cost driver.

A B A/B=C

departmental overhead
Costs Hours $ hours
rates

Radiator parts fabrication 80,000 10,000 8.0

Radiator assembly, weld, and

100,000 20,000 5.0
test

Compressor parts fabrication 120,000 5,000 24.0

Compressor assembly and test 180,000 45,000 4.0

Total 480,000 80,000

2. Compute a company-wide overhead rate using machine hours as the cost driver.

𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 480000

Companywide overhead rate = 𝑡𝑜𝑡𝑎𝑙 𝑚𝑎𝑐ℎ𝑖𝑛𝑒 ℎ𝑜𝑢𝑟𝑠 = =6
80000

3. Compute the overhead costs per batch of Maxi Flow and Alaska assuming:

(a) The company-wide rate.

 (b) The departmental rates.

overhead costs per batch:

The company-wide rate

Maxi Flow Alaska

Radiator parts fabrication 28 16

Radiator assembly, weld, and test 30 74

Compressor parts fabrication 32 8

Compressor assembly and test 26 66

Total 116 164

companywide rate 6 6

Companywide rate x total 696 984

The departmental rates:

departmental overhead rates MaxiFlow Alaska

8 28 16

5 30 74

24 32 8
 4 26 66

TOTAL 116 164

4. Compute the total costs per unit of Maxi Flow and Alaska assuming:

(a) The company-wide rate.

(b) The departmental rates.

total costs per unit

The company-wide rate

Maxi Flow Alaska

Direct material 135 110

Direct Labor cost 75 95

Overhead 696 984

total costs per unit 906 1189

The departmental rates

 Maxi Flow Alaska

Direct material 135 110

Direct Labor cost 75 95

Overhead 1246 954

total costs per unit 1456 1159

5. Is one product affected more than the other by use of departmental rates rather than a

company-wide rate? Why or why not?

Maxi flow is affected more by using departmental rates as the cost per unit has gone up