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2. FSI Company allocates support department costs to production departments before establishing predetermined overhead rates for use in product costing. Cutting uses machine hours as
2. FSI Company allocates support department costs to production departments before establishing predetermined overhead rates for use in product costing. Cutting uses machine hours as a base for overhead allocation and expects to use Finishing uses direct labor hours as a base for overhead allocation and expects to use 100,000 MH this year. FSI allocates support department costs to the Cutting Deparment and Finishing Departments before determining their pre-determined MO Rate 150,000 DLH this year. EngSupport costs are allocated to productive departments based on time of service while IT costs are allocated based on IT hours Department Departmental overhead EngSupport Cutting Finishing Total Time of service $2,000,000 $2,000,000 $3,000,000 $2,000,000 $9,000,000 IT hours 50 600 450 1140 1,000 2,000 12,000 8,000 23,000 During the year, Job 30-1 is completed. The job required Cutting Finishing DLH 200 300 100 Required: MH 400 a. Complete a cost allocation calculation/table using the step method to put all overhead amounts into the productive departments. (10 points) b. Calculate the predetermind overhead rates for the productive departments. (4 points) C. Calculate the total overhead applied to Job 30-1. (4 points) d. Expain how accountants could change two decisions related to support Department allocations and/or overhead allocations based on predetermined rates, to change the cost charged to this job. (4 points)
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