Question

Sequential 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	$500,000	$170,000	$42,000	$75,000
Square footage	—	2,700	5,400	5,400
Number of receiving orders	300	—	1,680	1,020
Direct labor hours	—	—	25,000	40,000

The support departments are ranked in order of highest cost to lowest cost.

Required:

1. Allocate the costs of the support departments using the sequential method. (Use the rounded values for subsequent calculations. Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar. If an amount is zero, enter "0".)

Allocation ratios:

	General Factory	Receiving	Assembly	Finishing
Square footage
Number of receiving orders

Allocations:

	General Factory	Receiving	Assembly	Finishing
Direct overhead cost	$	$	$	$
Allocate:
General Factory
Receiving
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

Answer 1

1). Calculation is as follows:-

2). Calculation of departmental overhead rates usind direct labor hours.
Assembly = $42,000 / 25,000 hours = $1.68 per labor hour
Finishing = $75,000 / 40,000 hours = $1.88 per labor hour