Question

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 80 800 120 1040

Computing hours    1,000    2,000 14,000 6,000 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 300    200

MH 400    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 1

1)

	Rep&Mait	QC	Machining	Assembly
Overhead costs	$   2,000,000	$     3,000,000	$        4,000,000	$        1,000,000
Distribution of overhead cost of Dept.Rep&Mait	$(2,000,000)	$         160,000	$        1,600,000	$            240,000
Distribution of overhead cost of QC		$   (3,160,000)	$        2,212,000	$            948,000
Total			$        7,812,000	$        2,188,000

2) Calculation of pre determined overhead rate

	Machining	Assembly
Total overhead cost	$   7,812,000	$     2,188,000
Machine hours	100000
Direct labor hours		200000
Pre determined overhead rate	$           78.12	$             10.94

3) Overhead applied to job 280

	Amount
Machining Department (78.12*400)	$         31,248
Assembly Department (10.94 *200)	$           2,188