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In: Accounting

Reciprocal Method Eilers Company has two producing departments and two support departments. The following budgeted data...

Reciprocal Method

Eilers Company has two producing departments and two support departments. The following budgeted data pertain to these four departments:


Support Departments		 Producing Departments
General
Factory		 Receiving Assembly Finishing
Direct overhead $400,000 $150,000 $45,000 $71,000
Square footage — 2,700 5,400 5,400
Number of receiving orders 300 — 1,680 1,020
Direct labor hours — — 25,000 40,000

Required:

1. Allocate the overhead costs of the support departments to the producing departments using the reciprocal method. (Round allocation ratios to two decimal places. Round allocated costs to the nearest dollar. If an amount is zero, enter "0".)

Allocation ratios:

General Factory Receiving Assembly Finishing
Square footage
Number of receiving orders

Allocations:

General Factory Receiving Assembly Finishing
Direct overhead cost $ $ $ $
General Factory
Receiving
Total $ $ $ $

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

Overhead Rate
Assembly $ per direct labor hour
Finishing $ per direct labor hour

Solutions

Expert Solution

  • All working forms part of the answer

[1]

General Factory

Receiving

Assembly

Finishing

Square Footage

0.00

0.20

0.40

0.40

0 / 13500

2700 / 13500

5400 / 13500

5400 / 13500

No of receiving order

0.10

0.00

0.56

0.34

300 / 3000

0 / 3000

1680 / 3000

1020 / 3000

General Factory

Receiving

Assembly

Finishing

Direct Overhead cost

$400,000

$150,000

$45,000

$71,000

General Factory

($423,469)

$84,694

$169,388

$169,388

Receiving

$23,469

($234,694)

$131,429

$79,796

Total

$0

($0)

$345,816

$320,184

[2]

Total Overhead allocated

Total DLHs

Overhead rate

Assembly

$345,816

25000

$13.83

per dlh

Finishing

$320,184

40000

$8.00

per dlh

--Working

Department

Denoted as

Receiving

R

General Factory

GF

R = ( 150000 + 0.2GF )

GF = ( 400000 + 0.1R )

R = 150000 + 0.2 ( 400000 + 0.1R )

GF = 400000 + 0.1 ( 150000 + 0.2GF )

R = 150000 + 80000 + 0.02R

GF = 400000 + 15000 + 0.02GF

R = 230000 / 0.98

GF = 415000 / 0.98

R = 234694

GF = 423469

$234,694

$423,469

ekkarill92 answered 2 years ago
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