Problem 4B-6 Step-Down Method versus Direct Method; Predetermined Overhead Rates [LO4-10, LO4-11] The Sendai Co., Ltd., of Japan has budgeted costsin its various departments as follows for the coming ear: Factory Administration Custodial Services 825,470 108,831 Personnel 28,970 60,569 633,098 865,282 $2,522,220 Maintenance Machining-overhead Assembly-overhead Total cost The company allocates service department coststo other departments in the order listed below. Square Feet of Total Direct Number of Labor Labor- Machine- Space Hours Occupied Employees Department Factory Administration Custodial Services Hours Hours 27 7,000 11,900 8,000 17,300 45,000 10 7,200 19,100 52,600 120,000 Personnel 24 Maintenance 59 Machining Assembly 76 61,000 140,800 35,200 114 160,000 15,000 235,000 310 358,900 104,200 296,000 176,000 Machining and Assembly are operating departments, the other departments are service departments. Factory Administration is allocated based on labor-hours, Custodial Services based on square feet occupied; Personnel based on number of employees, and Maintenance based on machine-hours. Required: 1. Allocate service department coststo consuming departments by the step-down method. Then compute predetermined overhead rates in the operating departments using machine-hours asthe allocation base in Machining and direct labor-hours as the allocation base in Assembly. 2. Repeat 1 above, this time using the direct method. Again compute predetermined overhead rates in Machining and Assembly. 3. Assume that the company doesn't bother with allocating service department costs but simply computes a single plantwide overhead rate that divides the total overhead costs (both service department and operating department costs) by the total direct labor-hours. Compute the plantwide overhead rate 4. Suppose a job requires machine and labor time as follows Direct Machine- Labor Hours Hours Machining Department Assembly Department 300 27 10 80 Total hours 310 107 Using the overhead rates computed in (1). (2, and (3) above, compute the amount of overhead cost that would be assignedto the job if the overhead rates were developed using the step-down method, the direct method, and the plantwide method. Complete this question by entering your answers in the tabs below Required 2 Required 1 Required 3 Required 4 Using the overhead rates computed in (1), (2), and (3) above, Compute the amount of overhead cost that would be assigned to the job if the overhead rates were developed using the step-down method, the direct method, and the plantwide method. (Do not round intermediate calculations. Round "Predetermined overhead rates" to 2 decimal places and other final answers to the nearest whole dollar amount.) Show less Overhead Cost Step-down method Direct method Plantwide method Required 3 Required 4
