Question

Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:

	Support Departments			Producing Departments
	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
Overhead	$90,000	$314,000	$167,000	$78,900	$107,800
Square feet	1,500	—	1,500	4,200	4,800
Machine hours	—	1,403	1,345	24,000	8,000
Purchase orders	20	40	7	120	60

The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders.

1. Allocate the overhead costs to the producing departments using the reciprocal method in Excel. (Round allocation ratios to four decimal places.)

                              Allocated OH to:                  Pesticide           Fertilizer

                  

                                                                           $____________   $____________

2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent).

                              OH Rate (per MachHr):        Pesticide            Fertilizer

                  

                                                                           $____________   $_________

Answer 1

Answer:

	Support	Producing
	Power	General Factory	Purchase	Pesticide	Liquid Fertilizer
Direct Costs	90,000	314,000	167,000	78,900	107,800
Square Feet	1,500	-	1,500	4,200	4,800
Machine Hours	-	1,403	1,345	24,000	8,000
Purchase Orders	20	40	7	120	60

1) Allocarion of OH costs to the departmwnts using the sequential Methods (highest to lowest OH)

	Proportion of Driver Used by
	Power	General Factory	Purchase	Pesticide	Liquid Fertilizer
Square Feet	0.1250	-	0.1250	0.3500	0.4000
Machine Hours	-	-	-	0.7500	0.2500
Purchase Orders	0.10	-	-	0.6000	0.3000

	Support	Producing
	Power	General Factory	Purchase	Pesticide	Liquid Fertilizer
Direct Costs	90,000	314,000	167,000	78,900	107,800
General Factory
(0.1250*314,000)	39,250	(39,250)
(0.1250*314,000)		(39,250)	39,250
(0.3500*314,000)		(109,900)		109,900
(0.4000*314,000)		(125,600)			125,600
	129,250	-	206,250	188,800	233,400
Purchasing
(0.1000*206,250)	20,625		(20,625)
(0.6000*206,250)			(123,750)	123,750
(0.3000*206,250)			(61,875)		61,875
	149,875	-	-	312,550	295,275
Power
(0.7500*147,875)	(112,406)			112,406
(0.2500*147,875)	(37,469)				37,469
Total After Allocation	-	-	-	424,956	332,744

2) Using Machine Hours, Computing Departmental OH Rates:

Pesticide	$ 17.71	Per Machine Hour
Liquid Fertilizer	$ 41.59	Per Machine Hour