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eBook Show Me How Direct Method and Overhead Rates Belami Company manufactures both shampoo and conditioner, with each product manufactured in separate departments. Three support

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    Direct Method and Overhead Rates

    Belami Company manufactures both shampoo and conditioner, 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 Shampoo Conditioner
    Overhead $94,000 $430,000 $150,000 $146,000 $170,000
    Square feet 3,000 3,000 9,600 8,400
    Machine hours 1,403 1,345 8,000 24,000
    Purchase orders 20 40 7 60 120

    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.

    Allocation ratios:

    Shampoo Conditioner
    Square feet fill in the blank 1 fill in the blank 2
    Machine hours fill in the blank 3 fill in the blank 4
    Purchase orders fill in the blank 5 fill in the blank 6

    Cost assignment:

    Shampoo Conditioner
    Direct costs $fill in the blank 7 $fill in the blank 8
    Power fill in the blank 9 fill in the blank 10
    General Factory fill in the blank 11 fill in the blank 12
    Purchasing fill in the blank 13 fill in the blank 14
    Total $fill in the blank 15 $fill in the blank 16

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

    Departmental overhead rates
    Shampoo $fill in the blank 17 per machine hour
    Conditioner $fill in the blank 18 per machine hour

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