Malmi Constructions Pty. Ltd. has two producing departments and two service departments. Monthly budget estimates are as follows: Producing Departments Machining Assembly $ 82,000 $ 52,000 $ 95,000 $ 17,000 $ 5,000 $ 3,000 Service Departments Stores Office $ 12,000 $ 9,000 Dept. overhead Direct material Indirect material $1,000 12 10 41 24 3,000 Number of employees Direct labour hours Indirect labour hours Floor aream) 1,500 400 1,400 4.00 350 1,600 2,400 600 Labour charge rates Direct (per hour Indirect (per hour) $12.00 $10.00 $10.00 $9.00 $11.00 $12.00 The company uses the step method to re allocate service department overheads and has decided to use number of employees to re allocate factory Office overheads and to use the total cost of materials to re allocate the stores department overheads. The office department is allocated first. In addition to the above budgeted department overhead costs the following plant wide overhead costs are expected each month: Allocation Basis Insurance (buildings) $ 1,500 floor space Electricity $ 2,000 number of employees Transport/freight $ 6,000 prime cost Canteen subsidy $ 1,250 total labour hours Overhead is applied to products on the basis of direct labour hours. Required 1) Calculate the overhead application rate for each of the producing departments using the step method. i) Calculate the factory overhead applied to products during the period assuming an actual activity level of 1660 DL hours for the machining department and 3000 DL hours in the assembly department. ii) Calculate the overhead applied in (b) if Malmi Constructions had allocated overhead on a plant-wide basis using Direct Labour Hours. Malmi Constructions Pty. Ltd. has two producing departments and two service departments. Monthly budget estimates are as follows: Producing Departments Machining Assembly $ 82,000 $ 52,000 $ 95,000 $ 17,000 $ 5,000 $ 3,000 Service Departments Stores Office $ 12,000 $ 9,000 Dept. overhead Direct material Indirect material $1,000 12 10 41 24 3,000 Number of employees Direct labour hours Indirect labour hours Floor aream) 1,500 400 1,400 4.00 350 1,600 2,400 600 Labour charge rates Direct (per hour Indirect (per hour) $12.00 $10.00 $10.00 $9.00 $11.00 $12.00 The company uses the step method to re allocate service department overheads and has decided to use number of employees to re allocate factory Office overheads and to use the total cost of materials to re allocate the stores department overheads. The office department is allocated first. In addition to the above budgeted department overhead costs the following plant wide overhead costs are expected each month: Allocation Basis Insurance (buildings) $ 1,500 floor space Electricity $ 2,000 number of employees Transport/freight $ 6,000 prime cost Canteen subsidy $ 1,250 total labour hours Overhead is applied to products on the basis of direct labour hours. Required 1) Calculate the overhead application rate for each of the producing departments using the step method. i) Calculate the factory overhead applied to products during the period assuming an actual activity level of 1660 DL hours for the machining department and 3000 DL hours in the assembly department. ii) Calculate the overhead applied in (b) if Malmi Constructions had allocated overhead on a plant-wide basis using Direct Labour Hours
