Question

LV2-a Company has used a two-stage, reciprocal method
cost allocation system for many years. In the first
stage, overhead costs from its two service departments
(repair and administration) are allocated to its two
production departments (molding and assembly) based
on the following activity levels:

   repair - repair hours

   administration - # of employees

In the second stage, LV2-a calculates pre-determined
overhead rates in the production departments using
the following activity levels:

   molding - machine hours

   assembly - direct labor hours

The following information is available for the four
departments:

                              Repair          Admin
Directly traced overhead      $70,000       $107,000 
Repair hours                   20,000         14,000
Number of employees              30             15

                              Molding        Assembly
Directly traced overhead     $234,000       $178,000  
Repair hours                    4,000          2,000
Number of employees              24              6 
Direct labor hours             12,000         20,000
Machine hours                  40,000          5,000

Calculate the amount of overhead allocated from the repair
department to the molding department.

Answer 1