Question

Indirect Cost Allocation: Direct Method

Charlie Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Charlie 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 using the direct method of overhead allocation. In November, the following overhead costs were recorded:

Melting Department overhead	$ 500,000
Molding Department overhead	400,000
General plant management	200,000
Plant security	100,000

Other pertinent data follow:

	Melting	Molding
Number of employees	60	40
Space occupied (square feet)	20,000	80,000
Machine hours	1,056	3,200
Direct labor hours	10,560	7,200

(a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments.

Department	Total	Melting	Molding
General Plant Management	Answer	Answer	Answer
Plant security	Answer	Answer	Answer

(b) Determine the total departmental overhead costs for the Melting and Molding Departments.

Melting $Answer

Molding $Answer

(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.

Note: Round final answers to two decimal places.
Melting $Answer

Molding Answer

Answer 1

a) schedule allocating general plant management Costs and plant security Cost to the melting and molding departments :- Particolaus Total Melting dept Molding dept General plant Management 200000 89,000 [60:40] 120,000 (200000 x 60 (200000 x 40 Too 100 Plant Security 80,000 yooooo [20000 sqft :80000 8ft) 100000 20000 20 100 7 [100000 x 80 100 3000001140000 120000 20000 80000 Total > 160000 b) 'Total departmental Overhead Costs for the Melting and molding departments Particulars Melling dept. Molding dept. Direct Cost 500000 Logo00 Allocated Cost: General plant Management 80,000 (refol a pont) Plant Security CReferci pout) Total Overhead Cost-> 640000 560000 c) Overhead Rate:- Particolaus Melting dept. / Holding dept. Total Overhead Cost (A) 640,000 560,000 Machine hours 1056 Direct labour bours } [8] overhead Rate (A/B) 7200 GOG:06 77: 78