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Problem 4B-6 Step-Down Method versus Direct Method; Predetermined Overhead Rates [LO4-10, LO4-11] The Sendai Co., Ltd., of Japan has budgeted costs in its various departments
Problem 4B-6 Step-Down Method versus Direct Method; Predetermined Overhead Rates [LO4-10, LO4-11] The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year Factory Administration Custodial Services Personnel Maintenance Machining overhead Assembly overhead S 994,245 202,335 28,650 122,120 921,900 277,525 Total cost $2,546,775 The company allocates service department costs to other departments in the order listed below Total Labor Square Feet of Space Direct Labor- Machine- Number of Employees Hours OccupiedHours Hours Factory Administration Custodial Services Personnel Maintenance Machining Assembly 15 12 51 30 120 10,800 7,200 3,300 19,800 80,000 100,000 7,000 15,000 47,900 56,000 183,750 240,000 40,000 216,000 61,250 250 389,900 181,100 272,000 245,000 Machining and Assembly are operating departments; the other departments are service departments. Factory Administration is allocated on the basis of labor-hours; Custodial Services on the basis of square feet occupied; Personnel on the basis of number of employees; and Maintenance on the basis of machine- hours
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