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Allocating Service Department Costs: Allocation Basis Alternatives Weld-Rite Fabricators has two producing departments, P1 and P2,...

Allocating Service Department Costs: Allocation Basis Alternatives
Weld-Rite Fabricators has two producing departments, P1 and P2, and one service department, S1.
Estimated directed overhead costs per month are as follows:

P1 $450,000
P2 750,000
S1 273,000


Other data follow:

P1 P2
Numbers of employees 150 50
Production capacity (units) 100,000 60,000
Space occupied (square feet) 5,000 15,000
Five-year average of S1's service output used 65% 35%

For each of the following allocation bases, determine the total estimated overhead cost for P1 and P2 after allocating S1 cost to the producing departments.

P1 P2
1. Based on number of employees Answer Answer
2. Production capacity in units Answer Answer
3. Space occupied Answer Answer
4. Five-year average of S1 service used Answer Answer
5. Estimated direct overhead costs Answer Answer

Solutions

Expert Solution

P1 P2
1. Based on number of employees 654750 818250
2. Production capacity in units 620625 852375
3. Space occupied 518250 954750
4. Five-year average of S1 service used 627450 845550
5. Estimated direct overhead costs 552375 920625
Workings:
1
P1 P2
Direct overhead costs 450000 750000
273000/(150+50)*150 204750
273000/(150+50)*50 68250
Total 654750 818250
2
P1 P2
Direct overhead costs 450000 750000
273000/(100000+60000)*100000 170625
273000/(100000+60000)*60000 102375
Total 620625 852375
3
P1 P2
Direct overhead costs 450000 750000
273000/(5000+15000)*5000 68250
273000/(5000+15000)*15000 204750
Total 518250 954750
4
P1 P2
Direct overhead costs 450000 750000
273000*65% 177450
273000*35% 95550
Total 627450 845550
5
P1 P2
Direct overhead costs 450000 750000
273000/(450000+750000)*450000 102375
273000/(450000+750000)*750000 170625
Total 552375 920625

ekkarill92 answered 1 year ago
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