The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as
ID: 2461686 • Letter: T
Question
The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year:
Machining and Assembly are operating departments; the other departments are service departments. Factory Administration is allocated on the basis of labor-hours; Custodial Services on the basis of square feet occupied; Personnel on the basis of number of employees; and Maintenance on the basis of machine-hours.
Allocate service department costs to consuming departments by the step-down method. Then compute predetermined overhead rates in the operating departments using a machine-hours basis in Machining and a direct labor-hours basis in Assembly. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rates" to 2 decimal places and other answers to the nearest whole dollar amount.)
Allocate service department costs to consuming departments by the direct method. Again, compute predetermined overhead rates in Machining and Assembly. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round "Predetermined overhead rates" to 2 decimal places and other answers to the nearest whole dollar amount.)
Assume that the company doesn’t bother with allocating service department costs but simply computes a single plantwide overhead rate based on total overhead costs (both service department and operating department costs) divided by total direct labor-hours. Compute the plantwide overhead rate. (Round your answer to 2 decimal places.)
Compute the amount of overhead cost that would be assigned to the job if the overhead rates were developed using the stepdown method, the direct method, and the plantwide method. (Round intermediate calculations to 2 decimal places and final calculations to the nearest whole dollar.)
The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year:
Explanation / Answer
Service Cost Allocation on the basis of Step down approach
We have to first Allocate the cost of custodial service as it provides services to all other department and also higher in cost.After that Personnel is allocated. Thirdly Factory admin and Maitenance is allocated simultaneously as they provide service to only operating division
3
Plant wide overhead rate= Total Cost/Total Labour hours
=2867600/346000
=8.29
4 Step down approach & Direct Method
Machining Department Cost= 190*8.51+29*5.91
=1617+171
=1788
Assembly department= 13*8.51+77*5.91
= 111+455
= 566
Total Cost= 2354
Total Cost using Plantwise Rate= 309*8.29
=2562
Factory Admin Custodial Service Personnel Maintenance Machining Assembly Cost before Allocation 490590 158312 38593 132075 1114572 933458 Allocation of Custodial Service 5972 (158312) 9012 13030 97723 32575 Cost After Allocation of Factory admin 496562 0 47605 145105 1212295 966033 Allocation of Personnel 4640 0 (47605) 10312 13061 19592 Cost before allocation of Factory admin 501202 0 0 155417 1225356 985625 Allocation of Factory admin (501202) 173827 327375 Allocation of Maintenance (155417) 133215 22202 Total Cost 0 1532398 1335202 Predetermined Overhead rate-Machine Hour 8.51 Predetermined overhead rate-labour hour 5.91Related Questions
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