Question

Calculating Departmental Overhead Rates Using Post-Allocation Costs Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct easts $160,000 $340,000 $114,600 593,000 Normal activity: Number of employees 60 30 170 13,300 Square footage 1,000 5,700 The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of square footage. Valron Company uses the direct method of support department cost allocation. Solve for the allocated costs to Fabricating and Assembly using the direct method of support department cost allocation. The Fabricating Department overhead rate is based on normal activity of 82,000 machine hours. The Assembly Department overhead rate is based on normal activity of 160,000 direct labar hours. Job 316 required six machine hours in Fabricating and four direct labor hours in Assembly. Total direct materials cost $120, and total direct labor cost was $80. Required: 1. Calculate the overhead rate for Fabricating based on machine hours and the overhead rate for Assembly based on direct labor hours. If required, round your answers to the nearest cent. Use the rounded values for subsequent calculations. Overhead Rate Fabricating department per mach. hr. Assembly department per DLH 2. Using the overhead rates Calculated in Requirement 1, calculate the cost of Job 316. If required, round your answer to the nearest cent. 3. What if Jab 316 had required one machine hour in Fabricating and four direct labor hours in Assembly? Direct labor and direct materials casts remained the same. Calculate the new cost of Jab 316. If required, round your answer to the nearest cent.

Answer 1

Solution: a) overhead rate: Fabricating Dept>Estimated OH/Esimated MH Assmbly Dept=Estimated OH/Estimated DLH 267800/82000 1439800/160000 3.27 Per MH 2.75 Per DLH b) Job 316 120.00 80.00 Direct material Direct labor Overhead applied Fabricating=3.27*6 Assembly=2.75*4 Total cost 19.62 11.00 230.62 c) Job 316 120.00 80.00 Direct material Direct labor Overhead applied Fabricating=3.27*1 Assembly=2.75*4 Total cost 3.27 11.00 214.27 Working for part a: Fabricating Direct cost Allocation of HR cost Allocation of General Factory cost Total cost Assembly 114600 51200 102000 267800 93000 108800 238000 439800 Allocation of HR cost** Allocation of General Factory cost** Fabricating Assembly 160000*80/180+170) 160000*170/180+170) 340000*5700/(5 700+13300) 340000*13300/(5 700+13300) |