Atlas Company has two service departments (maintenance and materials handling) a
ID: 2445605 • Letter: A
Question
Atlas Company has two service departments (maintenance and materials handling) and two production departments (I and II). The following information is available: maintenance costs are allocated based on direct labor usage and materials handling costs are allocated based on percentage of materials moved.
Allocate the appropriate department costs with the department that has the highest cost being allocated first. Calculate the total amount of overhead associated with each department using both the direct and step-down methods. Round percentages to two decimal places and amounts to zero decimal places
Maintenance Materials Handling I II Expected Overhead Costs $50,000 $80,000 $100,000 $150,000 Direct labor usage 10% 10% 60% 20% Pounds of materials 10% 20% 20% 50%Explanation / Answer
Step down Method: Maintenance Materials Handling I II Total Expected Overhead Costs $50,000.00 $80,000.00 $100,000.00 $150,000.00 $380,000.00 Direct labor usage 10.00% 10.00% 60.00% 20.00% 100.00% Pounds of materials 10.00% 20.00% 20.00% 50.00% 100.00% Step-1 Maintenance $5,000.00 $5,000.00 $30,000.00 $10,000.00 $50,000.00 Materials Handlings $8,000.00 $16,000.00 $16,000.00 $40,000.00 $80,000.00 Total $13,000.00 $21,000.00 $46,000.00 $50,000.00 $130,000.00 Step-2 Maintenance $1,300.00 $1,300.00 $7,800.00 $2,600.00 $13,000.00 Materials Handlings $2,100.00 $4,200.00 $4,200.00 $10,500.00 $21,000.00 Total $3,400.00 $5,500.00 $12,000.00 $13,100.00 $34,000.00 Step-3 Maintenance $340.00 $340.00 $2,040.00 $680.00 $3,400.00 Materials Handlings $550.00 $1,100.00 $1,100.00 $2,750.00 $5,500.00 Total $890.00 $1,440.00 $3,140.00 $3,430.00 $8,900.00 Step-3 Maintenance $89.00 $89.00 $534.00 $178.00 $890.00 Materials Handlings $144.00 $288.00 $288.00 $720.00 $1,440.00 Total $233.00 $377.00 $822.00 $898.00 $2,330.00 Step-3 Maintenance $23.30 $23.30 $139.80 $46.60 $233.00 Materials Handlings $37.70 $75.40 $75.40 $188.50 $377.00 Total $61.00 $98.70 $215.20 $235.10 $610.00 Step-3 Maintenance $6.10 $6.10 $36.60 $12.20 $61.00 Materials Handlings $9.87 $19.74 $19.74 $49.35 $98.70 Total $15.97 $25.84 $56.34 $61.55 $159.70 Step-3 Maintenance $1.60 $1.60 $9.58 $3.19 $15.97 Materials Handlings $2.58 $5.17 $5.17 $12.92 $25.84 Total $4.18 $6.77 $14.75 $16.11 $41.81 Step-3 Maintenance $0.42 $0.42 $2.51 $0.84 $4.18 Materials Handlings $0.68 $1.35 $1.35 $3.38 $6.77 Total $1.09 $1.77 $3.86 $4.22 $10.95 Step-3 Maintenance $0.11 $0.11 $0.66 $0.22 $1.09 Materials Handlings $0.18 $0.35 $0.35 $0.89 $1.77 Total $0.29 $0.46 $1.01 $1.10 $2.87 Step-3 Maintenance $0.03 $0.03 $0.17 $0.06 $0.29 Materials Handlings $0.05 $0.09 $0.09 $0.23 $0.46 Total $0.08 $0.12 $0.26 $0.29 $0.75 Total Cost Allocated $162,253.43 $217,746.38 $379,999.80 Direct Method: Maintenance Materials Handling I II Expected Overhead Costs $50,000.00 $80,000.00 $100,000.00 $150,000.00 Direct labor usage 10.00% 10.00% 60.00% 20.00% Pounds of materials 10.00% 20.00% 20.00% 50.00% Allocation: Maintenance ($50,000.00) 37500 12500 Materials Handlings ($80,000.00) 22857.14 57142.85714 Total $0.00 $0.00 $160,357.14 $219,642.86
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