In addition, plant insurance costs of $45,000 are to be allocated on the basis of floor space.

The manager of the company, Chris Green, has asked you to investigate the possibility of adopting the departmental overhead costing system, using the direct method to allocate costs from support departments to production departments.

Overhead costs in the stores department are to be reallocated using total material as the driver.

Overhead costs in the payroll department are to be allocated using the number of employees as the allocation base.

Overheads in the mixing department will be allocated to products based on machine hours, while the packaging department will allocate overheads to products based on direct labour cost.

Required: 1. Calculate the overhead amount distributed to the stores department. 2. Calculate the overhead amount distributed to the Payroll department. 3. Using the direct department method, calculate the total overhead amount allocated to the Mixing department.

Gelato Ltd. produces ice-cream products. The factory has two procluction departments (Mixing, Packaging) and two support departments (Stores. Payroll). Monthly budgeted information for each department is presented in the table below