Direct Method Eilers Company has two producing departments and two support depar

Question

Direct Method Eilers Company has two producing departments and two support departments. The following budgeted data pertain to these four departments Support Departments Producing Departments General Factory Receiving Assembly Finishing $75,000 4,400 1,200 42,000 Direct overhead Square footage Number of receiving orders Direct labor hours The company has decided to simplify its method of allocating support service costs by switching to the direct method Required: 1. Allocate the costs of the support departments to the producing departments using the direct method. Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar. Use the rounded values for subsequent calculations. $490,000 $200,000 $40,000 4,400 1,950 23,000 2,200 360 Allocation ratios: Assembly Finishing Square footage Number of receiving orders

Explanation / Answer

Allocation ratios :

Allocations :

2) Compute departmental overhead rate :

Assembly = 408810/23000 = 17.77 per direct labour hour

Finishing = 396190/42000 = 9.43 per direct labour hour

Assembly finishing Square footage 4400 4400 Number of receiving order 1950 1200

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