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 4 months ago

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