Perfect Image Ltd produces two types of computer printers, a laser model and an inkjet model, which pass through two production departments. Fabrication and Assembly. The following data relate to the year just ended:
Actual overhead costs for the year were $450,000.
1. Calculate the predetermined plantwide overhead rate based on direct labour hours.
2. Calculate the per unit cost of the laser and inkjet printers, based on a plantwide overhead rate assuming that direct labour hours is the cost driver.
3. Calculate predetermined departmental overhead rates, assuming that machine hours is the cost driver in Fabrication and direct labour hours is the cost driver in Assembly.
4. Calculate the per unit cost of the laser and inkjet printers, based on the departmental overhead rates.
5. Estimate the amount of underapplied or overapplied overhead using:
(a) Plantwide overhead rate.
(b) Departmental overhead rates.
6. Which approach is best for Perfect Image: a plantwide overhead rate or departmental overhead rates? Why?