eBook

Direct Method and Overhead Rates

Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:

	Support Departments			Producing Departments
	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
Overhead	$90,000	$316,000	$169,000	$78,500	$107,700
Square feet	1,500		1,500	4,200	4,800
Machine hours		1,403	1,345	24,000	8,000
Purchase orders	20	40	7	120	60

The company does not break overhead into fixed and variable components. The bases for allocation are powermachine hours; general factorysquare feet; and purchasingpurchase orders.

Required:

1. Allocate the overhead costs to the producing departments using the direct method. If required, round your allocation ratios to four decimal places and round allocated costs to the nearest dollar and use the rounded values for the subsequent calculations.

Cost assignment:

	Pesticide	Liquid Fertilizer
Direct costs	$fill in the blank 1	$fill in the blank 2
Power	fill in the blank 3	fill in the blank 4
General Factory	fill in the blank 5	fill in the blank 6
Purchasing	fill in the blank 7	fill in the blank 8
Total	$fill in the blank 9	$fill in the blank 10

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

	Departmental overhead rates
Pesticide	$fill in the blank 11 per machine hour
Liquid Fertilizer	$fill in the blank 12 per machine hour