Question

# Direct Method Eilers Company has two producing departments and two support departments. The following budgeted data...

Direct 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 \$450,000 \$180,000 \$41,000 \$72,000 Square footage — 2,900 5,800 5,800 Number of receiving orders 300 — 1,600 1,150 Direct labor hours — — 26,000 49,000 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 fill in the blank 1 fill in the blank 2 Number of receiving orders fill in the blank 3 fill in the blank 4 Allocations: Assembly Finishing General Factory \$fill in the blank 5 \$fill in the blank 6 Receiving fill in the blank 7 fill in the blank 8 Direct costs fill in the blank 9 fill in the blank 10 Total \$fill in the blank 11 \$fill in the blank 12 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.) Overhead Rate Assembly fill in the blank 13 per direct labor hour Finishing fill in the blank 14 per direct labor hour

Solution

1.

 Particulars Assembly Finishing Square footage 0.5000(5800/5800+5800) 0.5000(5800/5800+5800) Number of receiving order 0.5818(1600/1600+1150) 0.4181(1150/1600+1150)

2.

 Particulars Assembly Finishing General factory \$225000(450000*0.5) \$225000(450000*0.5) Receiving \$104724(180000*0.5818) \$75258(180000*0.4181) Direct cost \$41000 \$72000 Total \$370724 \$372258

3

 Particulars total cost after allocation direct labor hour overhead rate Assembly \$370724 26000 \$14.26 per direct labor hour Finishing \$372258 49000 \$7.60 per direct labor hour

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