The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as

Question

The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year:

Machining and Assembly are operating departments; the other departments are service departments. Factory Administration is allocated on the basis of labor-hours; Custodial Services on the basis of square feet occupied; Personnel on the basis of number of employees; and Maintenance on the basis of machine-hours.

The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year:

Required 1. Allocate service department costs to consuming departments by the step-down method. Then compute predetermined overhead rates in the operating departments using a machine-hours basis in Machining and a direct labor-hours basis in Assembly. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rates" to 2 decimal places and other answers to the nearest whole dollar amount.) Custodial Administration Services Factory Personnel Maintenance Machining Assembly $1,592,935 $ Operating department costs Costs to be allocated Allocation: 876,220 604,240 $ 104,500 $ 56,386$ 201,244 Factory administration Custodial services Personnel Maintenance Total overhead after allocations 604,240 $ 104,500 $ 56,386$ 201,244 $ 1,592,935 S$ 876,220 Predetermined overhead rate

Explanation / Answer

Allocation by Step down method:

Factory Administration Custodial Services Personnel Maintenance Machining Assembly Operating  Department Costs 1592935 876220 Cost to be allocated: 604240 104500 56386 201244 Factory Administration 13580 27440 73220 140000 350000 Custodial Services 14459 19760 60245 24098 Personnel 17987 32119 48179 Maintenance 234158 78053 Total overhead after allocations 2059457 1376550 Base 216750 222000 Predetermined overhead rate $9.50 $6.20

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