EXAMPLE COMPANY
Information
Rep&Maint costs are allocated to other departments based on time of service while QC costs are allocated based on computing hours.
Department Rep&Maint QC Machining Assembly Total
Departmental overhead $2,000,000 $3,000,000 $4,000,000 $1,000,000 $10,000,000
Time of service 40 50 800 150 1040
Computing hours 1,000 2,000 12,000 8,000 23,000
Machining uses machine hours as a base for overhead allocation and expects to use 100,000 MH this year.
Assembly uses direct labor hours as a base for overhead allocation and expects to use 200,000 DLH this year.
During the year, Job 280 is completed. The job required:
Machining Assembly
DLH 100 300
MH 500 100
Required:
a. Complete a cost allocation calculation/table using the step method, starting with Rep$Maint, to put all overhead amounts into the productive departments.
b. Calculate the predetermind overhead rates for the productive departments.
c. Calculate the total overhead applied to Job 280.
Answer is given below
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