EXAMPLE COMPANY

Information

Rep&Maint costs are allocated to other departments based on time of service while QC costs are allocated based on computing hours.

Department Rep&Maint QC Machining Assembly Total

Departmental overhead $2,000,000 $3,000,000 $4,000,000 $1,000,000 $10,000,000

Time of service 40 50 800 150 1040

Computing hours 1,000 2,000 12,000 8,000 23,000

Machining uses machine hours as a base for overhead allocation and expects to use 100,000 MH this year.

Assembly uses direct labor hours as a base for overhead allocation and expects to use 200,000 DLH this year.

During the year, Job 280 is completed. The job required:

Machining Assembly

DLH 100 300

MH 500 100

Required:

a. Complete a cost allocation calculation/table using the step method, starting with Rep$Maint, to put all overhead amounts into the productive departments.

b. Calculate the predetermind overhead rates for the productive departments.

c. Calculate the total overhead applied to Job 280.