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In: Accounting

Anders Company has two producing departments - Cutting and Sewing - and two support departments -...

Anders Company has two producing departments - Cutting and Sewing - and two support departments - Maintenance and General Factory (GF). Anders provided the following information on the four departments:

Maintenance

General Factory

Cutting

Sewing

Direct overhead costs

$10,000

$270,000

$56,400

$75,000

Machine hours

459

2,000

9,000

9,000

Square footage

2,500

3,418

5,000

8,500

The company does not break overhead into fixed and variable components. The bases for allocation are maintenance - machine hours; general factory - square feet.

1. Calculate the allocation ratios for the four departments using the sequential (step) method. The support departments are ranked in order of highest cost to lowest cost. Take allocation ratios out to four significant digits.

Maintenance

General Factory

Cutting

Sewing

Machine hours

Square footage

2. Allocate the overhead costs to the producing departments using the sequential (step) method. Round allocated costs to the nearest dollar.

Maintenance

General Factory

Cutting

Sewing

Direct overhead costs

$10,000

$270,000

$56,400

$75,000

Machine hours

Square footage

Total

Solutions

Expert Solution

  • Requirement 1

Maintenance

General Factory

Cutting

Sewing

Machine hours (9000 + 9000 = 18000)

0.0000

0.0000

0.5000

0.5000

Square footage (2500 + 5000 + 8500 = 16000)

0.1563

0.0000

0.3125

0.5313

--Working

Maintenance

General Factory

Cutting

Sewing

Machine hours (9000 + 9000 = 18000)

0

0

=9000/18000

=9000/18000

Square footage (2500 + 5000 + 8500 = 16000)

=2500/16000

0

=5000/16000

=8500/16000

  • Requirement 2

Maintenance

General Factory

Cutting

Sewing

Direct overhead costs

$10,000

$270,000

$56,400

$75,000

   General Factory [sq ft basis]

$42,201

($270,000)

$84,375

$143,451

   Maintenance [machine hr basis]

($52,201)

$0

$26,101

$26,101

Total

$0

$0

$166,876

$244,552

--Working

Maintenance

General Factory

Cutting

Sewing

Direct overhead costs

10000

270000

56400

75000

   General Factory [sq ft basis]

=270000*0.1563

-270000

=270000*0.3125

=270000*0.5313

   Maintenance [machine hr basis]

=-10000-42201

0

=52201*0.5

=52201*0.5

ekkarill92 answered 2 years ago
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