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Indirect Cost Allocation: Direct Method Charlie Manufacturing Company has two production departments, Melting and Molding. Direct gen- eral plant management and plant security costs benefit
Indirect Cost Allocation: Direct Method Charlie Manufacturing Company has two production departments, Melting and Molding. Direct gen- eral plant management and plant security costs benefit both production departments. Charlie allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments using the direct method of overhead allocation. In November, the following overhead costs were recorded: Melting Department overhead Molding Department overhead General plant management Plant security $500,000 400,000 200,000 100,000 Other pertinent data follow: Melting Molding Number of employees Space occupied (square feet). Machine hours Direct labor hours. 60 20,000 1,056 10,560 40 80,000 3,200 7,200 Required Prepare a schedule allocating general plant manageme costs and plant security costs to the Melting and Molding Departments. b. Determine the total departmental overhead costs for the Melting and Molding Departments. c. Assuming the Melting Department uses machine hours and the Molding Department uses direct labor hours to apply overhead to production, calculate the overhead rate for each production department
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