1. Company: Iota Energy

Scenario: Overhead Allocation

Data:

• Total Overhead Costs: $900,000
• Cost Pools: Equipment Maintenance ($300,000), Utilities ($250,000), Administrative ($350,000)
• Allocation Bases: Machine Hours (15,000), Square Footage (10,000), Direct Labor Hours (8,000)

Requirements:

1. Allocate overhead costs to each cost pool.
2. Determine the overhead rate for each allocation base.
3. Calculate the overhead applied to a department using 3,000 machine hours, 2,000 square feet, and 1,500 direct labor hours.
4. Discuss the benefits of accurate overhead allocation.
5. Recommend improvements to the overhead allocation process.