Step-Down Method versus Direct Method; Predetermined Overhead Rates
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 S605,500 229,926 65, 789 324,785 1,697,400 542, 200 $3,465, 600 The company allocates service department costs to other departments in the order listed below Square Total Feet of Direct Number of Labor-Space Labor- Machine- Employees Hours Occupied HourS Hours Department Factory Administration Custodial Services Personnel Maintenance Machining Assembly 27 12 21 5, 600 9,900 6,900 19, 600 7,700 53,000 10,500 80 120 320 100,000 140,000 99,000 280,000 250,000 40,000 236,000 80,000 432, 500 210, 700 335,000 360, 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 costs to consuming departments by the step-down method. Then compute predetermined overhead rates in the operating departments using machine-hours as the 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 4. Suppose a job requires machine and labor time as follows: Direct Machine-Labor- Hours 266 16 282 Hours Machining Department Assembly Department Total hours 30 80 110 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 Complete this question by entering your answers in the tabs below Required Required 2 Required 3 Required 4 Allocate service department costs to consuming departments by the step-down method. Then operating departments using machine-hours as the allocation base in Machining and direct labor-hours as the allocation base in Assembly. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rates" to 2 decimal places and other final answers to the nearest whole dollar amount.) compute predetermined overhead rates in the Show less actory Administration Custodial ervices Personnel Maintenance Machining Assembly Departmental costs before allocation Allocations $ 605,500S 229,926 S S 65,789 324,785 Factory administration Custodial services Personnel Maintenance Total costs after allocation Predetermined overhead rate Required 1Required 2Required 3Required 4 Repeat requirement 1 above, this time using the direct method. Again compute predetermined overhead rates in Machining and Assembly. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rates" to 2 decimal places and other final answers to the nearest whole dollar amount.) Factory Custodial Administration Services Personnel Maintenance Machining Assembly Departmental costs before allocation 605,500 Allocations 229,9266,789 324,785 Factory administration Custodial services Personnel Maintenance Total costs after allocation Predetermined overhead rate Required Required 2 Required 3 Required 4 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. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Show lessA Plantwide overhead rate per DLH Required 1Required 2 Required 3Required 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
