Exercise 7-05 Direct Method and Overhead Rates

Delille Company manufactures both traditional toothpaste and geltoothpaste, with each type of toothpaste produced in separatedepartments. Three support departments support the productiondepartments: power, general factory, and personnel. Budgeted dataon the five departments are as follows:

Support Departments			Producing Departments
Power	General Factory	Personnel		Traditional	Gel
Overhead	$90,000	$300,000	$120,000	$137,500	$222,500
Machine hours	-	1,403	1,345	8,000	24,000
Square feet	3,600	-	2,400	10,800	7,200
Number of employees	8	13	7	18	14

The company does not break overhead into fixed and variablecomponents. The bases for allocation are: power-machine hours,general factory-square feet, and personnel-number of employees.

You may use the attached spreadsheet to solve this activity. Youwill find the spreadsheet by clicking on the paper clip found inthe upper left hand corner of the screen.

Required:

1. Determine total product cost using the direct method ofoverhead allocation. (Take allocation ratios out to foursignificant digits.) Traditional: $ Gel: $
2. Using machine hours, compute departmental overhead rates thatproducing departments use to assign overhead costs to products.Round to two decimal places. Traditional: $ per MHr Gel: $ per MHr