The Lemler Company manufactures 3-1/2 inch computer disks with two service centers
and three producing departments. The budgeted data for June 1998 are:

Plant Administration costs are allocated on the basis of labor hours, and the
Personnel allocation is based on the number of employees. The overhead rates in
Cutting and Assembly are based on machine hours. The overhead rate in Finishing is
based on labor hours.

Required:
1. Using the direct method, allocate the service center costs to the producing departments, and calculate overhead rates for each producing department.
2. Using the step method, allocate the service center costs to the producing departments,
and calculate overhead rates for each producing department. If necessary,
round all allocations to producing departments to the nearest dollar. (Allocate
service centers’ Plant Administration first and Personnel second.)

Transcribed Image Text:

Overhead Labor Machine Cost Hours Hours Employees Service centers: Plant Administration $ 50,000 10,000 20 Personnel.... 35,000 20,000 25 Producing departments: Cutting Assembly 225,000 25,000 375,000 35,000 200,000 150 150,000 225 Finishing 400,000 30,000 20,000 175