The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for...

The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year:


Factory Administration	$	1,063,750
Custodial Services		125,540
Personnel		39,520
Maintenance		155,140
Machining—overhead		969,100
Assembly—overhead		875,450
Total cost	$	3,228,500

The company allocates service department costs to other departments in the order listed below.

Department	Number of Employees	Total Labor- Hours	Square Feet of Space Occupied	Direct Labor- Hours	Machine- Hours
Factory Administration	27	—	11,700	—	—
Custodial Services	11	13,400	2,900	—	—
Personnel	14	17,400	12,600	—	—
Maintenance	58	44,700	16,800	—	—
Machining	100	150,000	52,500	46,000	232,000
Assembly	150	200,000	17,500	229,000	29,000
	360	425,500	114,000	275,000	261,000

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:

	Machine- Hours	Direct Labor-Hours
Machining Department	270	29
Assembly Department	19	80
Total hours	289	109

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.

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ekkarill92 answered 2 days ago

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