The following information pertains to Gus Company: Service Departments Producing
ID: 2479413 • Letter: T
Question
The following information pertains to Gus Company:
Service Departments
Producing Departments
Personnel
Maintenance
Fabrication
Assembly
Budgeted overhead
$320,000
$576,000
$560,000
$640,000
Direct labor-hours
4,000
5,000
16,000
20,000
Machine-hours
24,000
16,000
Number of employees
8
10
30
50
Gus Company does not divide costs into fixed and variable components. 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 amounts to dollars).
If the direct method is used to allocate service department costs, the predetermined overhead rate for the Fabrication Department (rounded to 2 decimal places) would be:
Service Departments
Producing Departments
Explanation / Answer
predetermined oh rate for fabrication department;; 560000/16000 = $35/direct labour hour
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