Question
GONZALES MANUFACTURING has 2 support departments, Technology and General Maintenance. That have 2 producing departments, Alpha and Beta. General Dept Dept Technology Maintenance Alpha Beta
GONZALES MANUFACTURING has 2 support departments, Technology and General Maintenance. That have 2 producing departments, Alpha and Beta.
General
Dept
Dept
Technology
Maintenance
Alpha
Beta
Total
Overhead
$ 350,000
$ 228,000
$400,000
$322,000
$1,300,000
Budgeted Information
Budgeted machine hours
50,000
50,000
Budgeted direct labor hours
25,000
25,000
Budgeted Gen. Maint. Hrs.
10,000
16,000
12,000
38,000
Budgeted Technology Hrs.
7,000
21,000
7,000
35,000
Actual Information
Actual machine hours
55,000
55,000
Actual direct labor hours
26,000
26,000
Actual Gen. Maint. Hrs.
11,000
15,000
13,000
39,000
Actual Technology Hrs.
5,000
25,000
8,000
38,000
The company allocates support department costs using the step method.
Departments X and Y both use normal costing. Alpha allocates based on machine hours. Beta allocates based on direct labor hours.
Technology Department provides more support services for General Maintenance than the other way around.
SPACE PROVIDED HERE TO DRAW PICTURE
1. The charge rate for Technology services is:
$__________
Page 1
2. For product costing before the year, the amount of Technology costs allocated to Alpha would be:
$_______________
3. The predetermined overhead allocation rate that Alpha will use during the year to apply overhead is:
$______________
4. Do you think the reciprocal (algebraic) method would be advisable for the Company? Yes or No and WHY?
__________________________________________________________________ __________________________________________________________________ __________________________________________________________________ _________________________________________________________________
5. The journal entry to apply overhead in department Beta for the period is: DEBIT CREDIT
6. CONSIDER THE FOLLOWING STATEMENT:
"Because the step method is considered more accurate then direct, it should be used because the financial statements will be a lot more accurate."
____________________________________________________________________ ____________________________________________________________________ __________________________________________________________________
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Accounting Principles
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
10th Edition
1119491630, 978-1119491637, 978-0470534793
