Question: Nu Phi Company, accumulated the following data for 2015:
Milling Department manufacturing overhead.................................................................... $400,000
Finishing Department manufacturing overhead................................................................. $176,000
Machine hours used
Milling Department................................................................................................... 12,500 hours
Finishing Department............................................................................................... 2,750 hours
Labor hours used
Milling Department................................................................................................... 1,250 hours
Finishing Department................................................................................................ 1,100 hours
Required: - Calculate the plant-wide manufacturing rate using machine hours as the allocation base.
- Calculate the plant-wide manufacturing rate using direct labor hours as the allocation base.
- Calculate department overhead rates using machine hours in Milling and direct labor hours in Finishing as the allocation bases.
- Calculate department overhead rates using direct labor hours in Milling and machine hours in Finishing as the allocation bases.
- Which of these allocation systems seem to be the most appropriate? Explain.