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(Appendix 48) Direct Method of Support Department Cost Allocation Stevenson Company is divided into two operating divisions: Battery and Small Motors. The company allocates
(Appendix 48) Direct Method of Support Department Cost Allocation Stevenson Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and general factory costs to each operating division using the direct method. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. Support department cost allocations using the direct method are based on the following data: Support Departments Operating Divisions General Small Power Factory Battery Motors Overhead costs $160,000 $430,000 $163,000 $84,600 Machine hours 2,000 2,000 8,000 1,500 Square footage 1,000 1,500 5,000 15,000 Direct labor hours 18,000 60,000 Required: 1. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places, if necessary.) Battery Small Motors Power General Factory 2. Allocate the support service costs to the operating divisions. Round all amounts to the nearest dollar. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box blank or enter zero ("0"). Direct costs Support Departments Operating Divisions Power General Factory Battery Small Motors Allocate: Power General Factory Total 3. Assume divisional overhead rates are based on direct labor hours. Calculate the overhead rate for the Battery Division and for the Small Motors Division, Round your answers to the nearest cent. Battery overhead rate Small Motors overhead rate
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