Question

1. Sequential Method

   Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:

   	Support Departments		Producing Departments
   	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
   Overhead	$90,000	$314,000	$167,000	$78,900	$107,800
   Square feet	1,500	—	1,500	4,200	4,800
   Machine hours	—	1,403	1,345	24,000	8,000
   Purchase orders	20	40	7	120	60

   The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders.

   The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost.

   Required:

   1. Allocate the overhead costs to the producing departments using the sequential method. Carry out allocation ratios to four decimal places. Use these numbers for subsequent calculations. Round allocated costs to the nearest dollar. If an amount is zero, enter "0".

   Allocation ratios:

   	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
   Square feet
   Machine hours
   Purchase orders

   Cost allocation:

   	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
   Direct costs	$	$	$	$	$
   General Factory
   Purchasing
   Power
   Total	$	$	$	$	$

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

   	Overhead Rates
   Pesticide	$ per machine hour
   Liquid Fertilizer	$ per machine hour

Check My Work3 more Check My Work uses remaining.

Answer 1

Answer:

[1]

	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
Square feet [1500 + 1500 + 4200 + 4800 = 12000]	0.1250		0.1250	0.3500	0.4000
Machine hours [24000 + 8000 = 32000]				0.7500	0.2500
Purchase orders [ 20 + 120 + 60 = 200]	0.1000			0.6000	0.3000

--Working

	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
Square feet [1500 + 1500 + 4200 + 4800 = 12000]	=1500/12000		=1500/12000	=4200/12000	=4800/12000
Machine hours [24000 + 8000 = 32000]				=24000/32000	=8000/32000
Purchase orders [ 20 + 120 + 60 = 200]	=20/200			=120/200	=60/200

	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
Direct costs	$90000	$314000	$167000	$78900	$107800
General Factory	$39,250	($314,000)	$39,250	$109,900	$125,600
Purchasing	$20625		($206250)	$123750	$61875
Power	($149875)			$112406	$37469
Total	$0	$0	$0	$424956	$332844

--Working

	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
Direct costs	90000	314000	167000	78900	107800
General Factory	=314000*0.125	-314000	=314000*0.125	=314000*0.35	=314000*0.4
Purchasing	=206250*0.1		=-167000-39250	=206250*0.6	=206250*0.3
Power	=-90000-39250-20625			=149875*0.75	=149875*0.25

• Requirement 2

Pesticide	$                                                  17.71	$ per machine hour
Liquid Fertilizer	$                                                  41.61	$ per machine hour

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