Question

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	$165,000	$78,800	$107,400
Square feet	1,500	—	1,500	4,200	4,800
Machine hours	—	1,403	1,345	24,000	8,000
Purchase orders	20	40	—	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	0.1250	_________	0.1250	0.3500	0.4000
Machine hours	_______	_________	________	0.7500	0.2500
Purchase orders	0.1000	_________	________	0.6000	0.3000

Cost allocation:

	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
Direct costs	$90,000	$314,000	$165,000	$78,800	$107,400
General Factory	39,250	_____	39,250	109,900	125,600
Purchasing	20,625	_______	_____	______	_______
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

Answer 1

1.

	power	general factory	purchasing	pesticides	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	pesticides	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

2.

	power	general factory	purchasing	pesticides	liquid fertilizer
Direct costs	$90000	$314000	$165000	$78800	$107400
General factory	39250	($314000)	39250	109900	125600
Purchasing	20425		($204250)	122550	61275
Power	($149675)			112256.25	37418.75
Total	$0	$0	$0	$423506.25	$331693.75

working:

	power	general factory	purchasing	pesticides	liquid fertilizer
Direct costs	90000	314000	165000	78800	107400
General factory	=314000*0125	-314000	=314000*0.125	=314000*0.35	=314000*04
Purchasing	204250*0.1		-165000-39250	204250*0.6	204250*0.3
Power	-90000-39250-20425			149675*0.75	149675*0.25

3.

Overhead rates:

Pesticide=$423506.25/24000

=$17.65 per machine hour

Liquid fertilizer=$331693.75/8000

=$41.46 per machine hour

Please rate, Thanks.