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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 | $460,000 | $140,000 | $48,000 | $73,000 |
| Square footage | — | 2,000 | 4,000 | 4,000 |
| Number of receiving orders | 350 | — | 1,600 | 1,500 |
| Direct labor hours | — | — | 23,000 | 44,000 |
The company has decided to simplify its method of allocating support service costs by switching to the direct method.
Required:
1. Allocate the costs of the support departments to the producing departments using the direct method. Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar. Use the rounded values for subsequent calculations.
Allocation ratios: Assembly Finishing Square footage Number of receiving orders Allocations: Assembly Finishing General Factory Receiving Direct costs Total 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.) Overhead Rate Assemblyy Finishing per direct labor hour per direct labor hour
Expert Answer
| 1 | Assembly | finishing | |||||
| Allocation ratios | |||||||
| Square footage | 1 | 1 | |||||
| number of receiving orders | 0.5161 | 0.4839 | |||||
| Allocations | |||||||
| Assembly | finishing | ||||||
| General factory | 230000 | 230,000 | |||||
| Receiving | 72258 | 67742 | |||||
| direct costs | 48,000 | 73,000 | |||||
| total | 350258 | 370,742 | |||||
| 2) | overhead rate | ||||||
| Assemblry | 15.23 | ||||||
| finishing | 8.43 | ||||||
| (overhead rate = total overhead / direct labor ) | |||||||
