The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as

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

Step method Factory Admini-stration Custodial Services Personnel Mainten-ance Machining Assembly Operating department costs 891776 4,80,814 Costs to be allocated 6,05,530 1,60,344 54,799 99,237 Allocations: Factory Administration @ ¥1.9per labor-hour -6,05,530 19570 26600 84360 190000 285000 Custodial Services @ 1.42 per square foot -1,79,914 15762 22152 106500 35500 Personnel @ ¥417 per employee -97,161 22101 30024 45036 Maintenance @ ¥1.05 per machine-hour -2,27,850 195300 32550 Total overhead after allocations 0 0 0 0 14,13,600 8,78,900 Divide by machine-hours / DIRECT LABOR HOUR 2,17,000 319000 Overhead rate 6.51 2.76 Factory Administration is allocated on the basis of labor-hours 605530/318700 =1.9 per labor our 1.9 Custodial Services on the basis of square feet occupied 179914(149500-14500-8300) =1.42                                          1.42 Personnel on the basis of number of employees97161 /(290-25-14-18) =417 417 Maintenance on the basis of machine-hours. 227850/217000 1.05 Direct Method Factory Admini-stration Custodial Services Personnel Mainten-ance Machining Assembly Operating department costs 891776 4,80,814 Costs to be allocated 6,05,530 1,60,344 54,799 99,237 Factory Administration -6,05,530 242212 363318 Custodial Services -1,60,344 120258 40086 Personnel -54799 21920 32879 Maintenance -99237 85060 14176.714 Total overhead after allocations 1361226 931274 Divide by machine-hours / DIRECT LABOR HOUR 2,17,000 3,19,000 Overhead rate 6.27 2.92 Factory Administration is allocated on the basis of labor-hours 605530/250000 =2.42 per labor our 2.42 Custodial Services on the basis of square feet occupied160344/(75000+25000) =1.60 1.60 Personnel on the basis of number of employees 54799 /(72+108) =304.44 304.44 Maintenance on the basis of machine-hours 99237/217000 0.457 plantwide overhead rate Total Overhead cost 22,92,500 Direct Labor Hour 319000 plantwide overhead rate 2292500/319000 7.19 Step method Machining Department Machine-Hours 230*6.51 1497.3 Assembly Department Labor Hour 26*2.76 71.76 Total overhead cost 1569.06 Direct method Machining Department Machine-Hours 230*6.27 1442.1 Assembly Department Labor Hour 26*2.92 75.92 Total overhead cost 1518.02 plantwide overhead rate Direct Labor-Hours 99*7.19 711.81

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