(APPENDIX 16B) DIRECT METHOD OF SUPPORT DEPARTMENT COST ALLOCATION Dexter Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and human resources costs to each operating division using the direct method. Power costs are allocated on the basis of the number of machine hours and human resources costs on the basis of the number of employees. Support department cost allocations using the direct method are based on the following data:

Support Departments Operating Divisions Power Human Resources Battery Small Motors Overhead costs $100,000 $205,000 $180,000 $93,500 Machine hours 2,000 2,000 5,000 3,000 Number of employees 20 30 20 60 Direct labor hours 15,000 80,000 Required:
. Calculate the allocation ratios for Power and Human Resources. (Carry these calculations out to three significant digits.)
. Allocate the support service costs to the producing departments.
. Assume departmental overhead rates are based on direct labor hours. Calculate the overhead rate for the Battery Division and for the Small Motors Division. (Round overhead rates to the nearest cent.)
Exercise