Seattle Company has three producing departments (P1, P2, and P3) for which direct department costs are accumulated. In January, the following indirect costs of operation were incurred.

The following additional data have been collected for the three producing departments:

Required

a. Group the indirect cost items into cost pools based on the nature of the costs and their common basis for allocation. Identify the most appropriate allocation basis for each cost pool and determine the total January costs in the pool. (Hint: A cost pool may consist of one or more cost items.)
Allocate the cost pools directly to the three producing departments using the allocation bases selected in requirement (qd).
How much indirect cost would be allocated to each producing department if Seattle Company were using a plantwide rate based on direct labor hours? Based on machine hours?

d. Comment on the benefits of allocating costs in pools compared with using a plantwide rate.

Transcribed Image Text:

Plant manager's salary and office expense $30,600 Plant security 4,800 Plant nurse's salary and office expense. 6,600 Plant depreciation... Machine maintenance Plant cafeteria cost subsidy. 8,000 10,800 7,200 $68,000