Question
FSI Company allocates support department costs to production departments before establishing predetermined overhead rates for use in product costing. Cutting uses machine hours as a
FSI Company allocates support department costs to production departments before establishing predetermined overhead rates for use in product costing.
Cutting uses machine hours as a base for overhead allocation and expects to use 75,000 MH this year.
Finishing uses direct labor hours as a base for overhead allocation and expects to use 200,000 DLH this year.
FSI allocates support department costs to the Cutting Department and Finishing Departments before determining their pre-determined MO Rate EngSupport costs are allocated to productive departments based on time of service while IT costs are allocated based on IT hours
Department | EngSupport | IT | Cutting | Finishing | Total |
Departmental overhead | $2,000,000 | $2,000,000 | $3,000,000 | $3,000,000 | $10,000,000 |
Time of service | 40 | 100 | 600 | 500 | 1240 |
IT hours | 1,000 | 2,000 | 12,000 | 6,000 | 21,000 |
During the year, Job 30-2 is completed. The job required:
Cutting | finishing | |
DLH | 200 | 250 |
MH | 500 | 100 |
Required:
A. Complete a cost allocation calculation/table using the step method to put all overhead amounts into the productive departments.
B. Calculate the predetermined overhead rates for the productive departments.
C. Calculate the total overhead applied to Job 30-1.
D. Explain how accountants could change two decisions related to support Department allocations and/or overhead allocations based on predetermined rates, to change the cost charged to this job.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started