Question

The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year: Factory Administ
Required: 1. Allocate service department costs to consuming departments by the step-down method. Then compute predetermined o
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Answer #1

1)

Factory Administration Custodial Services Personnel Maintenance Machining Assembly
Departmental cost before allocation $640680 $103274 $31056 $148590 $1391860 $510140
Allocations:
Factory Administration -640680 18430 27740 100510 123500 370500
Custodial Services -121704 10692 18612 66000 26400
Personnel -69488 17888 20640 30960
Maintenance -285600 238000 47600
Total cost after allocation $0 $0 $0 $0 $1840000 $985600
Predetermined overhead rate $9.20 $4.40

Factory Administration

Total number of labor hours other than factory administration= 337200

Custodial Services= $640680*9700/337200= $18430

Personnel= $640680*14600/337200= $27740

Maintenance= $640680*52900/337200= $100510

Machining= $640680*65000/337200= $123500

Assembly= $640680*195000/337200= $370500

Custodial Services

Total cost of Custodial Services= $103274+18430= $121704

Total square feet occupied of the other four departments= 8100+14100+50000+20000= 92200

Personnel= $121704*8100/92200= $10692

Maintenance= $121704*14100/92200= $18612

Machining= $121704*50000/92200= $66000

Assembly= $121704*20000/92200= $26400

Personnel

Total cost of Personnel= $31056+27740+10692= $69488

Total number of employees of the other three departments= 52+60+90= 202

Maintenance= $69488*52/202= $17888

Machining= $69488*60/202= $20640

Assembly= $69488*90/202= $30960

Maintenance

Total cost Maintenance= $148590+100510+18612+17888= $285600

Total number of machine hours of the other two departments= 240000

Machining= $285600*200000/240000= $238000

Assembly= $285600*40000/240000= $47600

Predetermined overhead rate

Machining= = Total cost allocated/Number of machine hours

= $1840000/200000= $9.20

Assembly= Total cost allocated/Number of labor hours

= $985600/224000= $4.40

2)

Factory Administration Custodial Services Personnel Maintenance Machining Assembly
Departmental cost before allocation $640680 $103274 $31056 $148590 $1391860 $510140
Allocations:
Factory Administration -640680 160170 480510
Custodial Services -103274 73767 29507
Personnel -31056 12422 18634
Maintenance -148590 123825 24765
Total cost after allocation $0 $0 $0 $0 $1762044 $1063556
Predetermined overhead rate $8.81 $4.75

Factory Administration

Total labor hours of operating departments= 65000+195000= 260000

Machining = $640680*65000/260000= $160170

Assembly= $640680*195000/260000= $480510

Custodial Services

Total square feet occupied of operating departments= 50000+20000= 70000

Machining = $103274*50000/70000= $73767

Assembly= $103274*20000/70000= $29507

Personnel

Total number of employees of operating department= 60+90= 150

Machining = $31056*60/150= $12422

Assembly= $31056*90/150= $18634

Maintenance

Total number of machine hours of operating department= 200000+40000= 240000

Machining = $148590*200000/240000= $123825

Assembly= $148590*40000/240000= $24765

Predetermined overhead rate

Machining= = Total cost allocated/Number of machine hours

= $1762044/200000= $8.81

Assembly= Total cost allocated/Number of labor hours

= $1063556/224000= $4.75

3) Total direct labor hours= 273000 hours

Plantwide overhead rate= Total cost/Total direct labor hours

= $2825600/273000= $10.35 per DLH

4) Step-down method

Machining= $9.20*195= $1794

Assembly= $4.40*70= $308

Direct method

Machining= $8.81*195= $1717.95

Assembly= $4.75*70= $332.5

Plantwide method= $10.35*97= $1003.95

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