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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 $170,000 $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 fill in the blank 1 fill in the blank 2 fill in the blank 3 fill in the blank 4
Number of receiving orders fill in the blank 5 fill in the blank 6 fill in the blank 7 fill in the blank 8

Allocations:

General Factory Receiving Assembly Finishing
Direct overhead cost $fill in the blank 9 $fill in the blank 10 $fill in the blank 11 $fill in the blank 12
General Factory fill in the blank 13 fill in the blank 14 fill in the blank 15 fill in the blank 16
Receiving fill in the blank 17 fill in the blank 18 fill in the blank 19 fill in the blank 20
Total $fill in the blank 21 $fill in the blank 22 $fill in the blank 23 $fill in the blank 24

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

Overhead Rate
Assembly $fill in the blank 25 per direct labor hour
Finishing $fill in the blank 26 per direct labor hour

Solutions

Expert Solution

1. Allocation ratios:

General Factory Receiving Assembly Finishing
Square footage 0 0.2 0.4 0.4
Number of receiving orders 0.1 0 0.56 0.34

Allocations:

General Factory Receiving Assembly Finishing
Direct overhead cost 400000 170000 45000 71000
General factory -425510 85102 170204 170204
Receiving 25510 -255102 142857 86735
Total 0 0 358061 327939

Working:

Assume costs of General Factory to be 'G' and Receiving to be 'R'.

G = $400000 + 0.1R

G = 400000 + 0.1(170000 + 0.2G)

G = 400000 + 17000 + 0.02G

0.98G = 417000

G = 417000/0.98 = $425510

R = 170000 + 0.2G

R = 170000 + (0.2 x $425510)

R = 170000 + 85102

R = $255102

2.  

Overhead Rate
Assembly $    14.32 per direct labor hour
Finishing $       8.20 per direct labor hour

Working:

Assembly: $358061/25000 = $14.32

Finishing: $327939/40000 = $8.20

ekkarill92 answered 1 year ago
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