Problem One Benham, Inc. has two operating departments, assembly and shipping, a
ID: 2380908 • Letter: P
Question
Problem One
Benham, Inc. has two operating departments, assembly and shipping, and two support departments, human resources and property management. Each department conducts independent activities. The company uses the number of employees to allocate human resource costs and hours attributed to activities to allocate property management costs. The following information is available for the current month.
SUPPORT DEPARTMENTS
OPERATING DEPARTMENTS
Human Resources
Property Management
Assembly
Shipping
Budgeted overhead costs incurred before any interdepartmental cost allocations
$81,400
$229,800
$638,270
$512,540
Support work provided by Human Resources department:
Budgeted number of employees
N/A
25
148
49
Support work provided by Property Management department:
Budgeted processing time (in minutes)
360
N/A
2,460
1,360
Required: Using the above information, allocate the support departments
SUPPORT DEPARTMENTS
OPERATING DEPARTMENTS
Human Resources
Property Management
Assembly
Shipping
Budgeted overhead costs incurred before any interdepartmental cost allocations
$81,400
$229,800
$638,270
$512,540
Support work provided by Human Resources department:
Budgeted number of employees
N/A
25
148
49
Support work provided by Property Management department:
Budgeted processing time (in minutes)
360
N/A
2,460
1,360
Benham, Inc. has two operating departments, assembly and shipping, and two support departments, human resources and property management. Each department conducts independent activities. The company uses the number of employees to allocate human resource costs and hours attributed to activities to allocate property management costs. The following information is available for the current month. Required: Using the above information, allocate the support departments' costs to the operating departments using the direct method, the step-down method (allocating Human Resources as the support department allocated to the other support department), and the reciprocal method. After you have allocated the support departments' overhead, then calculate the total overhead allocated to the two operating departments, and place your answers in the spaces provided. Total Overhead allocated using the direct method. Assembly department Shipping department Total Overhead allocated using the step-down method. Assembly department _ Shipping department ___ Total Overhead allocated using the reciprocal method. Assembly department Shipping department __Explanation / Answer
using direct method
allocation of human resource department
to Assembly:
allocation = (148)/(148+49) * 81,400 = 61153.29
to shipping
allocation = (49)/(148+49) * 81,400 = 20246.7
allocation of property management department
to Assembly:
allocation = (2460)/(2460+1360) * 229,800 = 147986.38
to shipping
allocation = (1360)/(2460+1360) * 229,800 = 81813.62
using step down method
allocating human resource first
allocation to property management
allocation = (25)/(25+148+49) *81400 = 9166.67
allocation to assembly
allocation = (148)/(25+148+49) *81400 = 54266.67
allocation to shipping
allocation = (49)/(25+148+49) *81400 = 17966.67
now total cost of property management = 229,800 + 9166.67=238966.67
allocating property management
allocation to assembly
(2460)/(2460+1360) *238966.67 =153889.53
allocation to shipping
(1360)/(2460+1360) *238966.67 = 85077.1369
for reciprocal method you have to solve simulataneous equations
HR = 81400 + (%ge srvice provided to property management)*PM
and PM = 229800 + (%ge srvice provided to human resource)*HR
and then allocate them using direct method
%ge srvice provided to property management = 25/222 = 0.1126
%ge srvice provided to human resource = 360/(360+2460+1360) = 0.08612
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.