Question

The Sendal Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year, Factory Administration Custodial Services Personnel Maintenance Machining-overhead Assembly-overhead Total cost $1,614,315 143,440 46,502 129,983 1,313,880 232,480 $2,880,680 The company allocates service department costs to other departments in the order listed below. Department Factory Administration Custodial Services Personnel Maintenance Machining Assembly Square Total Feet of Direct Number of Labor Space Labor- Machine- Employees Hours Occupied Hours Hours 25 9,600 15,400 3,500 12,400 10,900 48, 100 13,200 80,000 90,000 112,000 204,000 120 200,000 38,000 214,000 68, een 320 355, 900 157,200 326,000 272,eee 24 Machining and Assembly are operating departments; the other departments are service departments. Factory Administration allocated based on labor-hours: Custodial Services based on square feet occupled; Personnel based on number of employees; and Maintenance based on machine-hours. Required: 1. Allocate service department costs to consuming departments by the step-down method. Then compute predetermined overhead rates in the operating departments using machine-hours as the allocation base in Machining and direct labor hours

Answer 1

D F G H 3 REQUIRED 1 REQUIRED 2 REQUIRED 3 REQUIRED 4 ALLOCATE SERVICE DEPARTMENT COST TO CONSUMING DEPARTMENTS BY THE STEP DOWN METHOD. THEN COMPUTE PREDETERMINED OVERHEAD 5 DEPARTMENT USING MACHINE HOURS AS THE ALLOCATION BASE IN MACHING AND DIRECT LABOUR HOURS AS THE ALLOCATION BASE IN ASSEMBLY. 6 ALLOCATION FROM A DEPARTMENT AS NEGATIVE AND ALLOCATION TO A DEPARTMENT AS POSITIVE. THE LINE SHOULD ADD ACROSS TO ZERO. DO NOT 7 CALCULATIONS. ROUND "PREDETERMIND OVERHEAD RATE" TO 2 DECIMAL PLACES AND OTHER FINAL ANSWERS TO NEAREST WHOLE DOLLARS AMOUNT. FACTORY CUSTODIAL PERSONNAL MAINTENANCE MACHINING ASSEMBLY ADMINISTRATION SERVICES 9 DEPARTMENTAL COST BEFORE ALLCATION 1,014,315.00 $ $ 46,502.00 $129,983.00 $ 1,313,880.00$ 232,480.00 143,440.00 $ 10 ALLOCATIONS FACTORY ADMINISTRATION 11 (1,014,315.00) $ 43,890.00 $ (187,330.00)S $ 137,085.00 $ 228,000.00 $ 570,000.00 17,160.00 $ 117,000.00$ 35,340.00 12 CUSTODIAL SERVICES 14,170.00 $ (96,012.00) $ 39,000,00 13 PERSONNAL $ 20,412.00 $ 30,240.00 $ 45,360.00 14 MAINTENANCE 15 TOTAL COST AFTER ALLOCATION $(304,640.00) $ 228,480.00 $ 76,160.00 $ $ $1,917,600.00 $ 963,000.00 7.05 $ $ 16 PREDETERMIND OVERHEAD RATE $ 2.95 17 18 IN THIS METHOD, 1ST SERVICE DEPARTMENT OVERHEAD DIVIDE IN ALL OTHER DEPARTMENT 19 2ND SERVICE DEPARTMENT DIVIDE IN ALL OTHER DEPARTMENT, EXCEPT THOSE SERVICE DEPARTMENT, WHICH ALREADY DIVIDE THEIR COST IN OTHER DEPARTMENT 20 SAME FOLLOWS BY ALL OTHER DEPARTMENT. 21 22 23

Calibri 11 A A Wrap Text Copy Paste General A BIU O E Merge & Center Format Painter $ Conditional Format % 9 O0. Cell Insert Formatting as Table Styles Clipboard Font Alignment Number Styles G50 fx A D E G 28 29 REQUIRED 1 REQUIRED 2 REQUIRED 3 REQUIRED 4 30 31 REPEAT REQUIREMENT 1 ABOVE, THIS TIME USING THE DIRECT METHOD. AGAIN COMPUTE PREDETERMINED OVERHEAD RATES IN MACHING AND ASSEMBLY 32 ALLOCATION FROM A DEPARTMENT AS NEGATIVE AND ALLOCATION TO A DEPARTMENT AS POSITIVE. THE LINE SHOULD ADD ACROSS TO ZERO. DO NOT 33 INTERMEDIATE CALCULATIONS. ROUND "PREDETERMIND OVERHEAD RATE" TO 2 DECIMAL PLACES AND OTHER FINAL ANSWERS TO NEAREST WHOLE DOLLARS FACTORY CUSTODIAL MAINTENANCE MACHINING PERSONNAL ASSEMBLY 34 ADMINISTRATION SERVICES 35 DEPARTMENTAL COST BEFORE ALLOCATION 1,014,315.00 $ 143,440.00 $ 46,502.00 $ 129,983.00 $1,313,880.00 $ 232,480.00 36 ALLOCATIONS 37 FACTORY ADMINISTRATION (1,014,315.00) $ $ 289,804.29 $ 724,510.71 $ 107,580.00 $ 38 CUSTODIAL SERVICES (143,440.00) 35,860.00 39 PERSONNAL 18,600.80 $ 97,487.25 $ $1,827,352.34 $1,053,247.66 (46,502.00) 27,901.20 40 $ (129,983.00) $ MAINTENANCE 41 TOTAL COST AFTER ALLOCATION 42 PREDETERMIND OVERHEAD RATE 32,495.75 $ 6.72 S 3.23 43 44 45 46 IN DIRECT METHOD, SERVICE DEPARTMENT OVERHEAD ALLOCATING BETWEEN ONLY OPERTAING DEPARTMENT ACCORDING TO RATIO MENTIONED IN QUESTION. 47 48 49 50 Sheet1 Sheet3 Sheet2 144 Ready R Shot on realme 1 By @m!T

EWrap Text General в IU J Format Painter ES F Merge & Center Conditional Format Formatting as Table Styles % , Insert Delete Format Cell Cpboard Font Alignment Number Styles G74 Cells A В 53 E G 54 REQUIRED 1 REQUIRED 2 REQUIRED 3 REQUIRED 4 55 ASSUME THAT THE COMPANY DOESN'T BOTHER WITH ALLOCATING SERVICE DEPARTMENT COSTS BUT SIMPLYCOMPUTES A PLANTWIDE OVERHEAD RATE THAT 56 DIVIDES THE TOTAL OVERHEAD COSTS (BOTH SERVICE DEPARTMENT AND OPERATING DEPARTMENT COSTS) BY THE TOTAL DIRECT LABOUR HOURS. COMPUTE 57 PLANTWIDE OVERHAED RATE $ 8.84 PER DLH 58 CALCULATION OF OVERHEAD PER DLH 59 60 FACTORY ADMINISTRATION 61 CUSTODIAL SERVICES $ 1,014,315.00 143,440.00 62 PERSONNAL 63 MAINTENANCE 64 MACHINING 65 ASSEMBLY $ 46.502.00 129,983,00 1.313.880.00 232,480.00 66 67 TOTAL OVERHEAD 68 DIRECT LABOUR HOUR 69 OVERHAED PER DIRECT LABOUR HOUR $ 2,880,600.00 326000 8.84 (TOTAL OVERHAED/DIRECT LABOUR HOUR) 70 71 COMPANY CAN'T FOLLOW THE ALLOCATING METHOD. SO WE CAN ADD ALL THE COST AND DIVIDE THE TOTAL OVERHAED BY DIRECT LABOUR HOUR 72 73 74 Sheet2 Sheet3 i Sheet1 Ready Shot on realme 1 By @m!T

EA Merge& Center l Conditional Format poard Cell Insert Dele Formatting as Table Styles Font Allignment Number G82 Styles REQUIRED 1 REQUIRED 2 REQUIRED 3 REQUIRED 4 USING THE ABOVE OVERHAED RATES COMPUTED IN (1), (2) AND (3) ABOVE, COMPUTE THE AMOUNT OF OVERHEAD COST THAT WOULD BE ASSIGNED O THE 0BIF OVERHEAD RATES WWERE DEVELOPED USING STEP DOWN METHOD, THE DIRECT METHOD AND THE PLANTWIDE METHOD. OVERHAED STEP DOWN METHOD DIRECT METHOD #1 PLANTWIDE METHOD 2,052 1,986 901 2 3 94 95 STEP DOWN METHOD MACHINE HOUR/LABOR HOUR RATE 260 S 74 S COST 97 MACHING DEPARTMENT (MACHINE HOUR) 98 ASSEMBLY DEPARTMENT (LABOUR HOUR) 7.05 1,833.00 2.95 S 218.60 100 2,051.60 01 a02 DIRECT METHOD MACHINE HOUR/LABOR HOUR RATE COST 6 72 716 72 260l Sheet1 Sheet2 Sheet3 R Shot on realme 1 By @m!T

Merge & Center Conditional Format Formatting as Table Styles Clipboard Font Alignment Number G124 A B E 2 DIRECT METHOD MACHINE 3 HOUR/LABOR HOUR RATE COST 04 MACHING DEPARTMENT (MACHINE HOUR) 05 ASSEMBLY DEPARTMENT (LABOUR HOUR) 260 $ 6.72 $ 1,746.73 74 $ $ 3.23 06 239.08 07 $ 1,985.81 08 109 110 DIRECT METHOD 111 112 MACHING DEPARTMENT RATE 28 S 74 $ LABOR HOUR COST 8.84 $ 247.41 113 ASSEMBLY DEPARTMENT 114 8.84 653.88 115 901.29 116 117 118 119 120 121 122 123 124 Sheet2 Sheet1 Sheet3 Shot on realme 1 By @m!T