Diane’s Pottery Manufacturing Company has two support departments, Maintenance D

Question

Diane’s Pottery Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $30,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $4,500 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $9,000 and $15,000, respectively. Data on standard service hours and number of employees are as follows: Maint. Person. Dept. Dept. Dept. Dept. X Y Standard service hours used 100 75 600 300 Number of employees 50 100 150 150 Direct labor hours 125 125 500 250 What are the total overhead costs associated with Department X after allocating the Maintenance and Personnel Departments using the direct method? Show work for each step

Explanation / Answer

Dept. X Direct costs 9000 Maintenance Department ($30,000 x 600/900) 20000 Personnel Department ($4,500 x150/300) 2250 Total costs 31250

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