Question

Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and...

Av-Y6 Company operates three service departments,
administration, maintenance, and personnel and
two production departments, assembly and packaging.

Information for the three service departments is
given below:

                              Admin      Maint      Person
Directly traced overhead    $65,000     $33,000    $74,000 
Square feet occupied          2,000       3,500      3,000
Number of employees              42          24         30  
Maintenance hours             2,500       2,000      4,000

Information for the two production departments is
given below:

                              Assembly          Packaging
Directly traced overhead      $167,030           $114,090  
Square feet occupied             2,100              1,400
Number of employees                 36                 18 
Maintenance hours                6,400              1,600
Direct labor hours              20,000             18,000
Machine hours                   10,000             15,000

Av-Y6 Company uses the sequential method of allocation.
Information on the allocation bases and activities for
each department are given below.

Administration department costs are allocated on the basis
of square feet occupied, maintenance department costs are
allocated on the basis of maintenance hours, and personnel
department costs are allocated on the basis of number of
employees. In the second stage, assembly department overhead
costs are assigned to products based on machine hours.

Calculate the amount of overhead allocated from the personnel
department to the packaging department.

Homework Answers

Answer #1

we shall first allocate cost to product department in sequence given

Admin Main Person Assembly packaging Total allocation base
Direct cost $65,000 $33,000 $74,000
Administration cost 22,750[3500/10,000]*65000 $19,500[3000/10000]*65000 square feet 10,000[3500+3000+2100+1400]
Total Maintenace cost to be allocated $55,750[$33,000+22,750]
Main cost $18,583[$55,750/12,000]*4000 Maintenance hours 12000[4000+6,400+1,600]
Total Personnel cost to be allocated $112,083[$18,583+$19,500+$74,000]
Personnel cost $37,361[18/54]*112,083 54 Number of employees [36+18]
verhead allocated from the personnel
department to the packaging department is $37,361

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