Nevada Company has three producing departments (p1, p2, and p3) for which direct department costs are accumulated. In January, the following indirect costs of operation were incurred. Plant manager's salary and office expense- $14,400

Plant security- 2,400

Plant nurse's salary and office expense- 3,000

Plant depreciation- 4,000

Machine Maintenance- 4,800

Plant cafeteria cost subsidy- 3,600

The following additional data have been collected for the three producing departments:

P1 P2 P3

Number of employees 10(p1) 15(p2) 5(p3)

Space occupied 2000(p1) 5000(p2) 3000(p3)

Direct labor hours 1600(p1) 4000(p2) 750(p3)

Machine hours 4800(p1) 8000(p2) 3200(p3)

Number of nurse office visits 30(p1) 35(p2) 10(p3)

a. Group the indirect cost items into cost pools based on the nature of the costs and their common basis for allocation. Identify the most appropriate allocation basis for each cost pool and determine the total January costs in the pool. (hint: a cost pool may consist of one or more cost items).

b. Allocate the cost pools directly to the three producing departments using the allocation bases selected in requirement (a).

c. How much indirect cost would be allocated to each producing department if Nevada Company were using a plant wide rate based on direct labor hours? Based on machine hours?

d. Comment on the benefits of allocating costs in pools compared with using a plantwide rate.