BUS 630 Comparative Analysis of Departmental and Company-Wide Overhead Rates in Managerial Accounting

A comparative analysis of departmental and company-wide overhead rates in managerial accounting for cost management.

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BUS 630Comparative Analysis of Departmental and Company-Wide OverheadRates in Managerial AccountingBUS 630 Week 2 AssignmentManagerial AccountingBUS 630BUS 630 Week 2 AssignmentMaxiFlow requires direct materials costs which total $135 per unit, while Alaska’s directmaterials requirements total $110 per unit. Direct labor costs per unit are $75 for MaxiFlow and$95 for Alaska.Auerbach Enterprises uses machine hours as the cost driver to assign overhead costs to the airconditioners. The company has used a company-wide predetermined overhead rate in pastyears, but the new controller, Bennie Leon, is considering the use of departmental overheadrates beginning with the next year.The following planning information is available for the next year for each the four manufacturingdepartments within the company:Overhead MachineCosts HoursRadiator parts fabrication.............. $ 80,000 10,000Radiator assembly, weld, and test.... 100,000 20,000Compressor parts fabrication.......... 120,000 5,000Compressor assembly and test........ 180,000 45,000Total $480,000 80,000Normally, the air conditioners are produced in batch sizes of 20 at a time. A production batch of20 units requires the following number of hours in each department:MaxiFlow AlaskaRadiator parts fabrication........... 28 16Radiator assembly, weld, and test....... 30 74Compressor parts fabrication......... 32 8Compressor assembly and test......... 26 66