Question

Sequential 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	$150,000	$45,000	$75,000
Square footage	—	2,700	5,400	5,400
Number of receiving orders	300	—	1,680	1,020
Direct labor hours	—	—	25,000	40,000

The support departments are ranked in order of highest cost to lowest cost.

Required:

1. Allocate the costs of the support departments using the sequential method. (Use the rounded values for subsequent calculations. Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar. If an amount is zero, enter "0".)

Allocation ratios:

	General Factory	Receiving	Assembly	Finishing
Square footage
Number of receiving orders

Allocations:

	General Factory	Receiving	Assembly	Finishing
Direct overhead cost
Allocate:
General Factory
Receiving
Total

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

	Overhead Rate
Assembly	_____ per direct labor hour
Finishing	______ per direct labor hour

Answer 1

1)
	General factory	Receiving	Assembly	Finishing
Square footage ( 2,700 + 5,400 + 5,400 = 13,500 )		0.2 ( 2,700 / 13,500)	0.4 ( 5,400 / 13,500)	0.4 ( 5,400 / 13,500)
Number of receiving orders ( 1,680 + 1,020 = 2,700 )			0.6222 ( 1,680 / 2,700)	0.3778 ( 1,020 / 2,700 )
Allocations:
	General Factory	Receiving	Assembly	Finishing
Direct overhead cost	$ 400,000	$ 150,000	$ 45,000	$ 75,000
Allocate:
General Factory       ( 0.2 : 0.4 : 0.4 )	($ 400,000)	$ 80,000	$ 160,000	$ 160,000
Receiving       ( 0.6222 : 0.3778 )		($ 230,000)	$ 143,106	$ 86,894
Total	$ 0	$ 0	$ 348,106	$ 321,894

2)
Overhead Rate
Assembly ( $ 348,106 / 25,000 DLH )	$ 13.92 per direct labor hour
Finishing ( $ 321,894 / 40,000 DLH )	$ 8.05 per direct labor hour