Support Departments Producing Departments Personnel Maintenance Fabrication Asse
ID: 2347683 • Letter: S
Question
Support
Departments
Producing
Departments
Personnel
Maintenance
Fabrication
Assembly
Budgeted overhead
$160,000
$288,000
$560,000
$640,000
Direct labor hours
8,000
10,000
32,000
40,000
Machine hours
12,000
15,000
48,000
32,000
Number of employees
16
20
60
100
Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours. (Round to the nearest dollar.)
If the direct method is used to allocate support-department costs, the predetermined overhead rate for the Fabrication Department would be (round to two decimal places)
a.
$28.80
b.
$5.40
c.
$7.28
d.
$24.78
Producing department overhead rates consist of
a.
only the direct costs of the producing department
b.
only the allocated support department costs
c.
direct costs and allocated support department costs
d.
common costs
Support
Departments
Producing
Departments
Personnel
Maintenance
Fabrication
Assembly
Budgeted overhead
$160,000
$288,000
$560,000
$640,000
Direct labor hours
8,000
10,000
32,000
40,000
Machine hours
12,000
15,000
48,000
32,000
Number of employees
16
20
60
100
Explanation / Answer
a. The direct method allocates support department costs only to operating departments. For Personnel: 160,000/(60+100) = 1000 per employee Fabriction Dept has 60 employees, so they are allocated 60*1000 = 60,000 For Maintenance: 288,000/(48,000+32,000) = 3.60 per machine hour. Fabriation has 48,000 machines hours, so they are allocated 48,000*3.60 = 172,800. Total allocated is 60,000 + 172,800 = 232,800. Since the rate is based on direct labor hours: 232,800/32,000 = $7.28 per direct labor hour. b. C - direct costs and allocated support department costs. Each department's overhead should consist of overhead directly associated with that department and overhead allocated to that department from the service departments.
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