Exercise 4 Leonardo Inc. manufactures engines used in electric power generating plants. Leonardo has two support departments (Plant Maintenance and Information Systems) and two operating departments (Machining and Assembly) in its manufacturing facility. Costs are accumulated in each department for planning and control purposes. For stock costing, however, the support department costs of Leonardo must be allocated to the operating departments. The data for Leonardo are listed below. Overhead Total Machining Assembly IS Maintenance Budgeted manufacturing overhead costs before any 1,316,000 400,000 200,000 116,000 inter-department cost 600,000 allocations Support work furnished By Plant Maintenance 8,000 2,400 4,000 1,600 Budgeted labor-hours Support work furnished By Information Systems 2,000 1,600 200 Budgeted computer time 1 200 1 Additional Information: Machining Assembly 1000 2000 IS 50 Maintenance 200 Machine hours Required: 1) Using direct method, reallocate the cost in the service departments to the production departments 2) Using step-down method, reallocate the cost in the service departments to the production departments 3) Using reciprocal method, reallocate the cost in the service departments to the production departments. 4) Calculate the overhead allocated to product (A) that takes 2 machine hours in Machining department and 2 machine hours in Assembly department. Exercise 4 Leonardo Inc. manufactures engines used in electric power generating plants. Leonardo has two support departments (Plant Maintenance and Information Systems) and two operating departments (Machining and Assembly) in its manufacturing facility. Costs are accumulated in each department for planning and control purposes. For stock costing, however, the support department costs of Leonardo must be allocated to the operating departments. The data for Leonardo are listed below. Overhead Total Machining Assembly IS Maintenance Budgeted manufacturing overhead costs before any 1,316,000 400,000 200,000 116,000 inter-department cost 600,000 allocations Support work furnished By Plant Maintenance 8,000 2,400 4,000 1,600 Budgeted labor-hours Support work furnished By Information Systems 2,000 1,600 200 Budgeted computer time 1 200 1 Additional Information: Machining Assembly 1000 2000 IS 50 Maintenance 200 Machine hours Required: 1) Using direct method, reallocate the cost in the service departments to the production departments 2) Using step-down method, reallocate the cost in the service departments to the production departments 3) Using reciprocal method, reallocate the cost in the service departments to the production departments. 4) Calculate the overhead allocated to product (A) that takes 2 machine hours in Machining department and 2 machine hours in Assembly department
