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The company has two revenue centers: Retail Services and Commercial Services. There are also three service...

The company has two revenue centers: Retail Services and Commercial Services. There are also three service centers: Maintenance, Office Support, and Facility Support. The maintenance center supplies support to all four other centers. The Maintenance area is allocated based on maintenance work orders (Office Support: 10 work orders, Facility Support: 20 work orders, Retail Services: 25 work orders, Commercial Services: 75 work orders). The Office Support is allocated based on hours (Facility Support: 40 hours of Office Support, Retail Services: 50 hours of Office Support, Commercial Services: 200 hours of Office Support). The Facility Support is allocated based on number of customers (Retail Services: 150 customers, Commerical Services: 75 customers). Overhead rates are calculated based on the number of invoices generated (Retail Services: 40,000 invoices, Commercial Services: 10,000 invoices).
Allocate overhead to the two revenue centers based on the direct method, and calculate the departmental overhead rates.
Maintenance Office Support Facility Support Retail Services Commercial Services
Center Costs $300,000 $125,000 $100,000 $75,000 $50,000
Maintenance
Office Support
Facility Support
Total
Overhead Rate
Allocate overhead to the two revenue centers based on the step method, and calculate the departmental overhead rates.
Maintenance Office Support Facility Support Retail Services Commercial Services
Center Costs $300,000 $125,000 $100,000 $75,000 $50,000
Maintenance
Office Support
Facility Support
Total
Overhead Rate

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Expert Solution

Answer a.
Service Department Cost Allocation Statement
Under Direct Method
Service Revenue
Maintenance Office Support Facility Support Retail Services Commercial Services
Budgeted Overhead Costs                   300,000               125,000               100,000                  75,000                     50,000
Allocation of Maintenace                 (300,000)                  75,000                  225,000
Allocation of Office Support             (125,000)                  25,000                  100,000
Allocation of Facility support             (100,000)                  66,667                     33,333
Total Allocated Costs                               -                             -                             -                  241,667                  408,333
No of Invoices                  40,000                     10,000
Overhead Rate (per Invoice)                       6.04                       40.83
Allocation of Maintenace
Retail Services - $300,000 X 25/100                     75,000
Commercial Services - $300,000 X 75/100                   225,000
Total                   300,000
Allocation of Office Support
Retail Services - $125,000 X 50/250                     25,000
Commercial Services - $125,000 X 200/250                   100,000
Total                   125,000
Allocation of Facility Support
Retail Services - $100,000 X 150/225                     66,667
Commercial Services - $100,000 X 75/225                     33,333
Total                   100,000
Answer a & C.
Support Department Cost Allocation Statement
Under Step Down Method
Service Revenue
Maintenance Office Support Facility Support Retail Services Commercial Services
Budgeted Overhead Costs                   300,000               125,000               100,000                  75,000                     50,000
Allocation of Maintenace                 (300,000)                 23,077                 46,154                  57,692                  173,077
Allocation of Office Support             (148,077)                 20,424                  25,531                  102,122
Allocation of Facility support             (166,578)                111,052                     55,526
Total Allocated Costs                               -                            (0)                            0                269,275                  380,725
No of Invoices            40,000.00               10,000.00
Overhead Rate (per Invoice)                       6.73                       38.07
Allocation of Maintenance:
Work Order Weighted Base Allocated Cost
Office Support                              10 7.69%                 23,077
Facility Support                              20 15.38%                 46,154
Retail Services                              25 19.23%                 57,692
Commercial Services                              75 57.69%               173,077
Total                           130 100.00%               300,000
Allocation of Office Support:
Hours Weighted Base Allocated Cost
Facility Support                              40 13.79%                 20,424
Retail Services                              50 17.24%                 25,531
Commercial Services                           200 68.97%               102,122
Total                           290 100.00%               148,077
Allocation of Facility Support:
No. of Customer   Weighted Base Allocated Cost
Retail Services                           150 66.67%               111,052
Commercial Services                              75 33.33%                 55,526
Total                           225 100.00%               166,578

ekkarill92 answered 2 years ago
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