The Michigan Company provides the following selected data about its three service and two operating departments: Production Dept1 Production Dept2 Service Dept 1 Service Dept 2 Overhead costs 200,000 267,000 180,000 105,000 Number of Employees 315 210 60 35 Square feet of space occupied 40,000 100,000 5,000 10,000 Hours of press time 15,000 30,000 0 0 Direct labor hours 10,000 20,000 0 0 Machine hours 50,000 60,000 The order and bases for allocating service department costs is given below: SD1; allocation base is number of employees SD2; Allocation base is space occupied Assume that PD1 and PD2 both use direct labor hours for computing OH rate. Using the Direct method of allocation, how much OH rate must be assigned to PD1? Using the Step Method of allocation, how much OH rate must be assigned to PD2? Using the Step Method, how much is the cost of SD1 to be allocated to PD2?
The Michigan Company provides the following selected data about its three service and two operating departments: Production Dept1 Production Dept2 Service Dept 1 Service Dept 2 Overhead costs 200,000 267,000 180,000 105,000 Number of Employees 315 210 60 35 Square feet of space occupied 40,000 100,000 5,000 10,000 Hours of press time 15,000 30,000 0 0 Direct labor hours 10,000 20,000 0 0 Machine hours 50,000 60,000 The order and bases for allocating service department costs is given below: SD1; allocation base is number of employees SD2; Allocation base is space occupied Assume that PD1 and PD2 both use direct labor hours for computing OH rate. Using the Direct method of allocation, how much OH rate must be assigned to PD1? Using the Step Method of allocation, how much OH rate must be assigned to PD2? Using the Step Method, how much is the cost of SD1 to be allocated to PD2?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The Michigan Company provides the following selected data about its three service and two operating departments:
|
|
Production Dept1 |
Production Dept2 |
Service Dept 1 |
Service Dept 2 |
|
Overhead costs |
200,000 |
267,000 |
180,000 |
105,000 |
|
Number of Employees |
315 |
210 |
60 |
35 |
|
Square feet of space occupied |
40,000 |
100,000 |
5,000 |
10,000 |
|
Hours of press time |
15,000 |
30,000 |
0 |
0 |
|
Direct labor hours |
10,000 |
20,000 |
0 |
0 |
|
Machine hours |
50,000 |
60,000 |
|
|
The order and bases for allocating service department costs is given below:
SD1; allocation base is number of employees
SD2; Allocation base is space occupied
Assume that PD1 and PD2 both use direct labor hours for computing OH rate.
- Using the Direct method of allocation, how much OH rate must be assigned to PD1?
- Using the Step Method of allocation, how much OH rate must be assigned to PD2?
- Using the Step Method, how much is the cost of SD1 to be allocated to PD2?
- Using the Step Method, how much is the total OH cost of PD1 after allocation?
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