The production section of a firm is serviced by personnel and computing as follo

Question

The production section of a firm is serviced by personnel and computing as follows Support departments Personnel ComputingFabrication Assembly Production departinents Budgeted overhead Labour hour Employees Service hours $40 000 4000 4 5000 $72 000$140 000 $160 000 20 000 25 8000 5000 16 000 15 12 000 Personnel costs are allocated on the number of employees and computing costs on service hours. Overhead rates are based on labour hours. If the direct method is used to allocate support department costs, what is the overhead rate for the Assembly Department? A. $8 B. $9.25 C. $9.44 D. $10.69

Explanation / Answer

Calculate overhead rate for the assembly department :

so answer is d) $10.69

Assembly department Budgeted overhead 160000 Allocation of personnel department cost 25000 Allocation of computing department cost 28800 Total overhead 213800 Labour hour 20000 Overhead rate 10.69

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