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In: Accounting

Rose Company has two production departments: Fabricating (P1) and Finishing (P2), and three support departments: Human...

  1. Rose Company has two production departments: Fabricating (P1) and Finishing (P2), and three support departments: Human Resources (S1), Plant Security (S2), and Maintenance (S3). Budgeted support department costs and the direct overhead of the production departments for 2020 are as follows:

Department: Budget Costs:

(S1) Human resources $80,000

(S2) Plant security $56,000

(S3) Maintenance $63,000

Department: Direct overhead:

(P1) Fabricating $280,000

(P2) Finishing $340,000

Rose allocates support department costs using the following activity drivers: Human Resources (number of employees), Plant Security (direct labor hours), and Maintenance (machine hours). Assume a service department does not provide services to itself. Budgeted 2020 support department driver consumption (by department) is as follows:

Driver: (S1) (S2) (S3) (P1) (P2) total

Number of employees= 0 20 20 90 70 200

direct labor hours= 400 0 1,200 3,200 3,200 8,000

Machine hours= 0 102 0 612 306 1,020

Use the direct method to calculate the total overhead for each production department. Round to 4 decimal places (e.g. $1.0000).

Solutions

Expert Solution

Allocation base
Cost driver base Total cost Fabricating Finishing Total Cost per cost driver
No. of employees for HR $        80,000 70 200 270 $    296.2963
Direct labor hours for plant security $        56,000 3200 8000 11200 $                  5
Machine hours for maintenance $        63,000 306 1020 1326 $      47.5113
Department
Particulars Fabricating Finishing
Allocation of HR cost of $80,000 $ 20,740.7410 $ 59,259.2600
Allocation of Plant security cost of $56,000 $           16,000 $           40,000
Allocation of HR cost of $63,000 $ 14,538.4578 $ 48,461.5260

For any clarification, please comment. Kindly Up Vote!

ekkarill92 answered 1 year ago
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