ACC 410 Study Guide - Final Guide: Lahn, Turnov

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15 Jun 2016

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Chapter 8: measuring and assigning support department costs. To find amount allocated for administration, you need to find the allocation rate for the two productions departments. Total allocated costs from administration to cutting is (160,000 x 0. 375) = ,000. The same process is done for allocating costs from administration to assembly. Then to allocate costs from custodial services to the two production departments, the same process is used but the allocation base is space occupied instead of labour hours. If administration costs are allocated first, then using the step-down method, costs are also allocated to. Custodial services along with the two production departments. , then you multiply this rate by the direct costs of administration (,000) Total allocated costs from administration to custodial services is (160,000 x 0. 111) = ,760. This allocated amount is then added to the direct costs of custodial services, then the total is used to allocate to the production departments.

Related Questions

Question 1:

Division A sells ground veal internally to Division B, which inturn, produces veal burgers that sell for $10 per pound. Division Aincurs costs of $1.25 per pound while Division B incurs additionalcosts of $5.00 per pound.

A1) What is Division A's operating income per burger, assumingthe transfer price of the ground veal is set at $2.00 perburger?

A2) What is the company's net operating income from the sale ofper pound of veal burger?

B) Division A has variable manufacturing costs of $25 per unitand fixed costs of $5 per unit. If Division A is operating atcapacity, what is the opportunity cost of an internal transfer whenthe market price is $35?

Use the following information to answer Question 2 &Question 3

Russet Company has two service departments and two producingdepartments. Budgeted costs and budgeted activity in the variousdepartments for the most recent year are presented below:

Service departments Operating Departments

Custodial CafeteriaCutting Assembly

Overhead costs ......... $252,000 $140,000 $600,000 $900,000

Square feet of space occupied .... 1,000 2,000 8,000 10,000

Number of employees .... 20 30 150 200

Machine-hours .......... 40,000 60,000

Service Department costs are allocated to operating departmentswith the costs of Custodial Services allocated on the basis ofsquare feet of space occupied. The costs of the Cafeteria areallocated on the basis of number of employees. Predeterminedoverhead rates in the Cutting and Assembly Departments are based onmachine-hours. Round all calculations to the nearest dollar.

2. Under the direct method of cost allocation, calculate thetotal overhead costs and the predetermined overhead rates for theyear in the Cutting and Assembly Departments?

3. Under the step method of cost allocation, calculate the totaloverhead costs and the predetermined overhead rates for the year inthe Cutting and Assembly Departments?

Procedure would be appreciated.

skyyellowjacket679

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


FactoryAdministration	$	994,245
CustodialServices		202,335
Personnel		28,650
Maintenance		122,120
Machiningâoverhead		921,900
Assemblyâoverhead		277,525

Total cost	$	2,546,775

The companyallocates service department costs to other departments in theorder listed below.

Department	Numberof Employees	Total Labor- Hours	Square Feet of Space Occupied	Direct Labor- Hours	Machine- Hours
FactoryAdministration	22	â	10,800	â	â
CustodialServices	15	7,000	7,200	â	â
Personnel	12	15,000	3,300	â	â
Maintenance	51	47,900	19,800	â	â
Machining	30	80,000	100,000	56,000	183,750
Assembly	120	240,000	40,000	216,000	61,250

	250	389,900	181,100	272,000	245,000

Machining and Assembly are operating departments; the otherdepartments are service departments. Factory Administration isallocated on the basis of labor-hours; Custodial Services on thebasis of square feet occupied; Personnel on the basis of number ofemployees; and Maintenance on the basis of machine-hours.

Required:

Allocate service department costs to consuming departments bythe step-down method. Then compute predetermined overhead rates inthe operating departments using a machine-hours basis in Machiningand a direct labor-hours basis in Assembly. (Please enterallocations from a department as negative and allocations to adepartment as positive. The line should add across to zero. Do notround intermediate calculations. Round "Predetermined overheadrates" to 2 decimal places and other answers to the nearest wholedollar amount.)

Allocate service department costs to consuming departments bythe direct method. Again, compute predetermined overhead rates inMachining and Assembly. (Please enter allocations from adepartment as negative and allocations to a department as positive.The line should add across to zero. Do not round intermediatecalculations. Round "Predetermined overhead rates" to 2 decimalplaces and other answers to the nearest whole dollaramount.)

3.	Assume that the company doesnât bother with allocating servicedepartment costs but simply computes a single plantwide overheadrate based on total overhead costs (both service department andoperating department costs) divided by total direct labor-hours.Compute the plantwide overhead rate. (Round your answer to2 decimal places.)

4.	Suppose a job requires machineand labor time as follows:

	Machine-Hours	Direct Labor-Hours
MachiningDepartment	270	26
AssemblyDepartment	11	77

Total hours	281	103

Compute the amount of overhead cost that would be assigned tothe job if the overhead rates were developed using the stepdownmethod, the direct method, and the plantwide method. (Roundintermediate calculations to 2 decimal places and finalcalculations to the nearest whole dollar.)

POCHTAR CORPORATION

The POCHTAR CORPORATION had used a single plant-wide rate to determine its predetermined overhead rate at the beginning of the year, but it has now decided that the most appropriate method is to use two individual department overhead rates, one for the Machining Department and one for the Assembly Department. In computing the predetermined overhead rate(s), whether a single plant wide rate is used or whether two department overhead rates are used, direct labor hours is used as the cost driver for the operating departments.

At the beginning of the year the POCHTAR CORPORATION has prepared individual department overhead budgets, before any allocations, and identified cost drivers for the departments listed below:

DEPARTMENT OVERHEAD BUDGETS

Support Departments:

Building and grounds (cost driver: square feet) $12,000

Personnel (cost driver: employees) 1,200

General plant administration (cost driver: manufacturing hours) 25,000

Operating Departments:

Machining $35,500

Assembly 46,300

BUDGETED AMOUNT OF EACH COST DRIVER

The budgeted amounts for each cost driver per department are given below:

Department Direct labor hrs. Employees Square feet Manuf. hours

Building & Grounds 0 0 0 0

Personnel 0 0 12,000 0

General plant 0 35 8,000 0

Machining 5,000 50 30,000 8,000

Assembly 15,000 100 50,000 17,000

REQUIRED:

What is the predetermined overhead rate using a single plant-wide rate? If necessary, round to the nearest cent.

What are the two predetermined overhead department rates, using the direct method of allocating support costs to the operating departments. ? If necessary, round to the nearest cent.

What are the two predetermined overhead department rates, using the step method of allocating support costs to the operating departments. ? If necessary, round to the nearest cent.

Based on the following information about two jobs, A and B, determine the total overhead costs for each job by using (1) the single plant-wide rate computed in question 1 above and (2) two predetermined overhead rates using the direct method of allocating support costs to the operating departments computed in question 2 above. Very briefly explain which method makes more sense. Please do not simply say that one method is more accurate than the other.

Direct Labor Hours:

Machining Department Assembly Department

Job A 18 2

Job B 3 17

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ACC 410 Study Guide - Final Guide: Lahn, Turnov

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