Direct Method

Eilers Company has two producing departments and two support departments. The following budgeted data pertain to these four departments:

Support Departments Producing Departments

General Factory Receiving Assembly Finishing

Direct overhead $490,000 $170,000 $41,000 $78,000

Square footage 2,7005, 4005, 400

Number of receiving orders 360 1,7501, 150

Direct labor hours 21,000 50,000

The company has decided to simplify its method of allocating support service costs by switching to the direct method.

Required:

1. Allocate the costs of the support departments to the producing departments using the direct method. Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar. Use the rounded values for subsequent calculations.

Allocation ratios:

	Assembly	Finishing
Square footage
Number of receiving orders
Allocations:
	Assembly	Finishing
General Factory	$	$
Receiving
Direct costs
Total	$	$

2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)

	Overhead Rate
Assembly	per direct labor hour
Finishing	per direct labor hour