Question

# Eilers Company has two producing departments and two support departments. The following budgeted data pertain to...

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 \$470,000 \$180,000 \$45,000 \$76,000 Square footage — 2,700 5,400 5,400 Number of receiving orders 330 — 2,000 1,100 Direct labor hours — — 27,000 46,000

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 Assembly ______ per direct labor hour Finishing ______ per direct labor hour

 1 Allocation ratios: Assembly Finishing Square footage 0.5000 0.5000 Number of receiving orders 0.6452 0.3548 Allocations: Assembly Finishing General Factory 235000 235000 Receiving 116136 63864 Direct costs 45000 76000 Total 396136 374864 2 Overhead Rate: Assembly 14.67 per direct labor hour =396136/27000 Finishing 8.15 per direct labor hour =374864/46000
 Workings: Allocation ratios: Assembly Finishing Square footage =5400/(5400+5400) =5400/(5400+5400) Number of receiving orders =2000/(2000+1100) =1100/(2000+1100) Allocations: Assembly Finishing General Factory =470000*0.5 =470000*0.5 Receiving =180000*0.6452 =180000*0.3548

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