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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 4 months ago
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