Question

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Indirect Cost Allocation: Direct Method Sprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded: Melting Department direct overhead $140,000 Molding Department direct overhead 300.000 General plant management 100.000 Plant security 25,000 Other pertinent data follow: Melting Molding Number of employees 40 50 Space occupied (square feet) 10,000 40,000 Machine hours 10,000 2,000 Direct labor hours 4,000 20,000 (a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments. Instructions: Do not round computations until your final answers. Then, round your answer to the nearest whole number. Melting Molding Department Total General Plant Management S Plant security $ (b) Determine the total departmental overhead costs for the Melting and Molding Departments. Use rounded answers to compute total departmental overhead costs for each department. Melting $ Molding $ X (c) Assuming the Melting Department uses machine hours and the Molding Department uses direct labor hours to apply overhead to production, calculate the overhead rate for each production department. Use rounded answers to compute and then round final answers to two decimal places. Melting $ Molding $

Answer 1

A) calculation of activity rate

General plant management

= $100000/(40+50)

= $1111.111 per employee

Plant security

= $25000/50000 equare feet

= 0.50 $ per square feet

Particulars	Total	Melting	Molding
General plant management	$100000	$44444	$55556
Plant security	$25000	$5000	$20000

B) calculation of total overhead

Melting department = $44444 + $5000 + $140000 = $189444

Molding department = $55556 + $20000 + $300000 = $375556

C) melting department

= $189444/10000 = $18.94 per machine hour

Molding department

= $375556 / 20000 = $18.78 per labor hour.

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