Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Macalister Corporation is developing departmental overhead rates based on direct labor hours for its two production departments-Molding and Assembly. The Molding Department employs 23 people,

image text in transcribed Macalister Corporation is developing departmental overhead rates based on direct labor hours for its two production departments-Molding and Assembly. The Molding Department employs 23 people, and the Assembly Department employs 81 people. Each person in these two departments works 1,960 hours per year. The production- related overhead costs for the Molding Department are budgeted at $235,000, and the Assembly Department costs are budgeted at $82,000. Two support departments -Engineering and General Factory-directly support the two production departments and have budgeted costs of $215,000 and $353,000, respectively. The production departments' overhead rates cannot be determined until the support departments' costs are properly allocated. The following schedule reflects the use of the Engineering Department's and General Factory Department's output by the various departments. Engineering hours Square feet Engineering General Factory Holding Assembly 114,000 2,100 2,100 3,900 375,200 79,800 For all requirements, round allocation ratios to four significant digits and round allocated costs to the nearest dollar. Required: 1. Calculate the overhead rates per direct labor hour for the Molding Department and the Assembly Department using the direct allocation method to charge the production departments for support department costs. Round final answers to the nearest cent. Overhead rate per DLH Assembly 160.01 2. Calculate the overhead rates per direct labor hour for the Molding Department and the Assembly Department using the reciprocal method to charge support department costs to each other and to the production departments. Round final answers to the nearest cent. Round your intermediate calculations to four decimal places. Holding Assembly Overhead rate per DLH 282.26 3. Explain the difference between the methods, and indicate the arguments generally presented to support the reciprocal method over the direct allocation method. (CMA adapted) The reciprocal allocation method is preferred because it recognizes that all support departments serve one another

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

11th Canadian edition Volume 2

1119048540, 978-1119048541

More Books

Students also viewed these Accounting questions

Question

What is job rotation ?

Answered: 1 week ago