XYZ Ltd has two production departments: assembly and finishing. There are also t
ID: 2564303 • Letter: X
Question
XYZ Ltd has two production departments: assembly and finishing. There are also two support departments: maintenance and human resources (HR). The following estimates for the production departments were made for the current year:
Assembly
Finishing
Total
Manufacturing overheads
$356,000
$471,000
$827,000
The budgeted overhead costs for the year for each support departments are as follows:
Maintenance $142,000
HR $173,000
The usage of the support departments’ output (hours of service) for the year is as follows:
User of the service
Maintenance
HR
Maintenance
0
26
HR
0
0
Assembly
26
34
Finishing
36
48
Use the direct method to allocate the budgeted overhead costs of the Maintenance and HR departments to the production departments (Assembly and Finishing). Enter the amount of total manufacturing overhead borne by the Finishing department.
Assembly
Finishing
Total
Manufacturing overheads
$356,000
$471,000
$827,000
Explanation / Answer
Direct allocation method implies that, the overhead of the service departments to be allocated to production departments directly with out concerning the service done to other service department. Thus inter service within service departments is ignored for the purpose of direct allocation.
Assembly Finishing Maintenance HR Manufacturing OH ( as given) 356000 471000 142000 173000 Maintenance ( ratio = 26:36) 59548.39 82451.61 -142000 HR ( Ratio = 34 : 48) 71731.71 101268.3 -173000 487280.1 654719.9 0 0 Total Manufacturing OH borne by Finishing department = 654,720...final answerRelated Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.