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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

	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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