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: Factory Administration Custodial Services Personnel Maintenance Machining-overhead Assemb Total cost $ 901,110 105,833 51,720 127,797 728,736 246,304 $2,161,500 ly-overhead The company allocates service department costs to other departments in the order listed below Square Total Feet of Direct Number of Labor- Space Labor- Machine Employees Hours Occupied HoursHours Department 24 Factory Administration Custodial Services Personnel Maintenance Machining Assembly 6,400 6,700 6, 700 13,400 9,700 7,700 13,900 53 72 108 280 100,000 60, 000 45,000 164, 00 200,000 20, 000 209,000 82,000 367,800 116,700 254,000 246,000 Machining and Assembly are operating departments; the other departments are service departments. Factory Administration is allocated based on labor-hours; Custodial Services based on square feet occupied; Personnel based on number of employees; and Maintenance based on machine-hours

Explanation / Answer

Answer 1. Service Department Cost Allocation Statement Under Step Down Method. Service Operating Factory Administration Custodial Services Personnel Maintenance Machining Assembly Operating Department Costs          728,736.00          246,304.00 Costs to be allocated          901,110.00          105,833.00             51,720.00          127,797.00 Allocation: Factory Administration        (901,110.00)             16,415.00             32,830.00          116,865.00          245,000.00          490,000.00 Custodial Services        (122,248.00)             11,446.00             16,402.00             70,800.00             23,600.00 Personnel          (95,996.00)             21,836.00             29,664.00             44,496.00 Maintenance        (282,900.00)          188,600.00             94,300.00 Total Overhead after Allocation                            -                              -                              -                              -         1,262,800.00          898,700.00 Predetermined Overhead Rate                       7.70                       4.30 Allocation of Factory Administration Allocation Rate (Labor Hours) Weighted Base Allocated Cost Custodial Services               6,700.00 1.82%             16,415.00 Personnel             13,400.00 3.64%             32,830.00 Maintenance             47,700.00 12.97%          116,865.00 Machining          100,000.00 27.19%          245,000.00 Assembly          200,000.00 54.38%          490,000.00 Total          367,800.00 100.00%          901,110.00 Allocation of Custodial Services Allocation Rate (sq. feet occupied) Weighted Base Allocated Cost Personnel               9,700.00 9.36%             11,446.00 Maintenance             13,900.00 13.42%             16,402.00 Machining             60,000.00 57.92%             70,800.00 Assembly             20,000.00 19.31%             23,600.00 Total          103,600.00 100.00%          122,248.00 Allocation of Personnel Allocation Rate (no. of employees) Weighted Base Allocated Cost Maintenance                     53.00 22.75%             21,836.00 Machining                     72.00 30.90%             29,664.00 Assembly                   108.00 46.35%             44,496.00 Total                   233.00 100.00%             95,996.00 Allocation of Maintenance Allocation Rate (Machine Hrs) Weighted Base Allocated Cost Machining          164,000.00 66.67%          188,600.00 Assembly             82,000.00 33.33%             94,300.00 Total          246,000.00 100.00%          282,900.00 Answer 2. Service Department Cost Allocation Statement Under Direct Method. Service Operating Factory Administration Custodial Services Personnel Maintenance Machining Assembly Operating Department Costs          728,736.00          246,304.00 Costs to be allocated          901,110.00          105,833.00             51,720.00          127,797.00 Allocation: Factory Administration        (901,110.00)          300,370.00          600,740.00 Custodial Services        (105,833.00)             79,374.75             26,458.25 Personnel          (51,720.00)             20,688.00             31,032.00 Maintenance        (127,797.00)             85,198.00             42,599.00 Total Overhead after Allocation                            -                              -                              -                              -         1,214,366.75          947,133.25 Predetermined Overhead Rate                       7.40                       4.53 Allocation of Factory Administration Allocation Rate (Labor Hours) Weighted Base Allocated Cost Machining          100,000.00 33.33%          300,370.00 Assembly          200,000.00 66.67%          600,740.00 Total          300,000.00 100.00%          901,110.00 Allocation of Custodial Services Allocation Rate (sq. feet occupied) Weighted Base Allocated Cost Machining             60,000.00 75.00%             79,374.75 Assembly             20,000.00 25.00%             26,458.25 Total             80,000.00 100.00%          105,833.00 Allocation of Personnel Allocation Rate (no. of employees) Weighted Base Allocated Cost Machining                     72.00 40.00%             20,688.00 Assembly                   108.00 60.00%             31,032.00 Total                   180.00 100.00%             51,720.00 Allocation of Maintenance Allocation Rate (Machine Hrs) Weighted Base Allocated Cost Machining          164,000.00 66.67%             85,198.00 Assembly             82,000.00 33.33%             42,599.00 Total          246,000.00 100.00%          127,797.00 Answer 3. Plantwide Overhead Rate = $2,161,500 (Total Overhead) / 254,000 DLH Plantwide Overhead Rate = $8.51 per DLH Answer 4. Machining Assembly Total Overhead Machine Hrs                         240                           16 Direct Labor Hours                           29                           74 Step Down Method               1,848.00                   318.20               2,166.20 Direct Method               1,777.12                   335.35               2,112.47 Plantwide Method                   246.79                   629.73                   876.51

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