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The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for...

The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year:

Factory Administration $ 819,840
Custodial Services 98,337
Personnel 26,358
Maintenance 170,555
Machining—overhead 1,126,484
Assembly—overhead 618,226
Total cost $ 2,859,800

The company allocates service department costs to other departments in the order listed below.

Department Number of
Employees		 Total
Labor-
Hours		 Square
Feet of
Space
Occupied		 Direct
Labor-
Hours		 Machine-
Hours
Factory Administration 30 — 5,300 — —
Custodial Services 11 15,900 10,200 — —
Personnel 16 19,300 7,700 — —
Maintenance 53 47,600 12,200 — —
Machining 92 60,000 60,000 118,000 176,250
Assembly 138 150,000 20,000 203,000 105,750
340 292,800 115,400 321,000 282,000


Machining and Assembly are operating departments; the other departments are service departments. Factory Administration is allocated based on labor-hours; Custodial Services based on square feet occupied; Personnel based on number of employees; and Maintenance based on machine-hours.

Required:

1. Allocate service department costs to consuming departments by the step-down method. Then compute predetermined overhead rates in the operating departments using machine-hours as the allocation base in Machining and direct labor-hours as the allocation base in Assembly.

2. Repeat (1) above, this time using the direct method. Again compute predetermined overhead rates in Machining and Assembly.

3. Assume that the company doesn’t bother with allocating service department costs but simply computes a single plantwide overhead rate that divides the total overhead costs (both service department and operating department costs) by the total direct labor-hours. Compute the plantwide overhead rate.

4. Suppose a job requires machine and labor time as follows:

Machine-
Hours		 Direct
Labor-Hours
Machining Department 260 32
Assembly Department 18 84
Total hours 278 116

Using the overhead rates computed in (1), (2), and (3) above, compute the amount of overhead cost that would be assigned to the job if the overhead rates were developed using the step-down method, the direct method, and the plantwide method.

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ekkarill92 answered 10 months ago
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