Question

need help with 7.21E.

dont understand how to caluclate allocation ratios using sequential method.

Exercise 7.20 Direct Method and Overhead Rates Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufac- tured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows: Support Departments Producing Departments Power General Factory Purchasing Pesticide Liquid Fertilizer Overhead $90,000 $314,000 $167,000 $78,900 $107,800 Square feet 1,500 1,500 4,200 4,800 Machine hours 1,403 1,345 24,000 8,000 Purchase orders 120 60 40 The company does not break overhead into fixed and variable components. The bases for alloca- tion are power machine hours; general factory square feet; and purchasing purchase orders. Required: 1. Allocate the overhead costs to the producing departments using the direct method. (Take allocation ratios out to four significant digits. Round allocated costs to the nearest dollar.) 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.) Exercise 7.21 Sequential Method Refer to the data in Exercise 7.20. The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the overhead costs to the producing departments using the sequential method. (Take allocation ratios out to four significant digits. Round allocated costs to the nearest dollar.) 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)

Answer 1

Jasmine Company Power $90,000 1,500 Support General Factory $3,14,000 Direct Costs Square feet Machine hours Purchase orders Purchasing $1,67,000 1,500 1,345 Producing Pesticide Liquid Fertilizer $78,900 $1,07,800 4,200 4,800 24,000 8,000 120 60 1,403 20 40 The companny does not break OH into fixed & variable compoennts. The bases for allocation are power--machine hours, general factory--sq feet, and purchasing--purchase orders. Requirment 1 Power 0.1250 Proportion of Driver Used By: General Factory Purchasing 0.1250 Square feet Machine hours Purchase orders Pesticide 0.3500 0.7500 0.6000 Liquid Fertilizer 0.4000 0.2500 0.3000 0.10 Support Power General Factory 90,000 3,14,000 Purchasing 1,67,000 Producing Pesticide Liquid Fertilizer 78,900 1,07,800 39,250 Direct costs: General Factory (.1250*314,000) (.1250*314,000) (-3500*314,000) (.4000*314,000) 39,250 (39,250) (39,250) (1,09,900) (1,25,600) 1,09,900 1,25,600 2,33,400 1,29,250 2,06,250 1,88,800 20,625 Purchasing (.1000*206,250) (.6000*206,250) (-3000*206,250) (20,625) (1,23,750) (61,875) 1,23,750 1,49,875 61,875 2,95,275 3,12,550 1,12,406 Power (.7500*149,875) (.2500*149,875) Total after allocation (1,12,406) (37,469) 37,469 3,32,744 4,24,956 Requirment 2 Pesticide Liquid Fertilizer $17.71 per machine hour $41.59 per machine hour

Jasmine Company Power Support General Factory 314000 Purchasing 90000 1500 Direct Costs Square feet Machine hours Purchase orders 167000 1500 1345 Pesticide 78900 4200 24000 120 Producing Liquid Fertilizer 107800 4800 8000 60 1403 20 40 The companny does not break OH into fix for allocation are power--machine hours, Requirment1 Power =C8/(SUM(C8:G8)) Proportion of Driver Used By: General Factory Purchasing =E8/SUM(CS:G8) Square feet Machine hours Purchase orders Pesticide =F8/SUM(CS:G8) = (F9/(F9+G9) =F10/(C10+F10+G10) Liquid Fertilizer =G8/SUM(C8:68) =1-F19 =1-C20-F20 =C10/(C10+F10+G10) 0 Power Support General Factory =D7 Purchasing Pesticide Producing Liquid Fertilizer =G7 =C7 =E7 =F7 =D25*C18 Direct costs: General Factory (1250*314,000) (.1250*314,000) (3500*314,000) (.4000*314,000) =E18D25 --C27 --E28 --F29 --G30 -SUM(D25:030) =F18 D25 =G18D25 -SUM(G25:G30) =C25+C27 =SUM(E25:E30) =SUM(F25:F30) =C20*E31 Purchasing (.1000*206,250) (.6000*206,250) (-3000*206,250) =F20E31 --C33 -F34 --G35 -SUM(E31:E35) =G20*131 =SUM(G31:G35) =SUM(C31:C35) -SUM(D31:035) -SUM(F31:F35) =F19°C36 Power 1.7500*149,875) (2500149,875) Total after allocation --F38 --G39 =SUM(C36:C39) =G19°C36 =SUM(G36:G39) SUM(D36:D39) =SUM(E36:E39) =SUM(F36:F39) Requirment 2 Pesticide Liquid Fertilizer =F40/F9 =G40/G9 per machine hour per machine hour