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Tempest Industries has two service departments (General Factory and Human Resources) and two production departments (Machining and Assembly). The company uses the direct method of
Tempest Industries has two service departments (General Factory and Human Resources) and two production departments (Machining and Assembly). The company uses the direct method of service-department cost allocation, allocating General Factory cost on the basis of square feet and Human Resources cost on the basis of employees. Budgeted allocation-base and operating data for the four departments follow. Square feet Employees Machine hours Labor hours General Human Factory Resources Machining 8, 2004 4,200 , 200 96,000 62 42 180 320 --- 68,000 46,200 26,200 112,000 Assembly 36,000 240 21,200 90,000 Additional information: Budgeted costs of General Factory and Human Resources respectively amount to $1,680,000 and $1,070,000. The anticipated overhead costs incurred directly in the Machining and Assembly Departments respectively total $3,770,000 and $2,460,000. The manufacturing overhead application bases used by Tempest's production departments are: Machining, machine hours; Assembly, labor hours. Company policy holds that a department's overhead application rate is based on a department's own overhead plus an allocated share of service-department cost. Required: A. Allocate the company's service-department costs to the producing departments. B. Compute the overhead application rates for Machining and Assembly
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