COST ACCOUNTING-Cost allocation to divisions. Holbrook Corporation has three divisions
Question # 00113497
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Updated on: 10/07/2015 01:07 PM Due on: 11/06/2015
15-30 Allocating costs of support departments; step-down and direct methods. The Central Valley Company | ||||||||||||||||||
has prepared department overhead budgets for budgeted-volume levels before allocations as follows: | Page 650 | |||||||||||||||||
Support departments: | ||||||||||||||||||
Building and grounds | $ 45,000.00 | 2. Using the direct method, rework requirement 1. | ||||||||||||||||
Personnel | 300 | 3. Based on the following information about two jobs, determine the total overhead costs for each job by | ||||||||||||||||
General plant administration | 37,320 | using rates developed in (a) requirement 1 and (b) requirement 2. | ||||||||||||||||
Cafeteria: operating loss | 970 | |||||||||||||||||
Storeroom | 9,990 | $ 93,580.00 | Direct Manufacturing Labor-Hours | |||||||||||||||
Machining | Assembly | |||||||||||||||||
Operating departments: | Job 88 | 17 | 7 | |||||||||||||||
Machining | $ 36,600.00 | Job 89 | 9 | 20 | ||||||||||||||
Assembly | 46,000 | $ 82,600.00 | ||||||||||||||||
Total for support and operating departments | $ 176,180.00 | 4. The company evaluates the performance of the operating department managers on the basis of how | ||||||||||||||||
well they managed their total costs, including allocated costs. As the manager of the Machining | ||||||||||||||||||
Management has decided that the most appropriate inventory costs are achieved by using individualdepartment | Department, which allocation method would you prefer from the results obtained in requirements 1 | |||||||||||||||||
overhead rates. These rates are developed after support-department costs are allocated to | and 2? Explain. | |||||||||||||||||
operating departments. | ||||||||||||||||||
Bases for allocation are to be selected from the following: | ||||||||||||||||||
Department | Direct Manufacturing Labor-Hours | Number of Employees | Square Feet of Floor Spcace Occupied | Manufacturing Labor-Hours | Number of Requisitions | |||||||||||||
Buidings and grounds | 0 | 0 | 0 | 0 | 0 | |||||||||||||
Personnel | 0 | 0 | 2,500 | 0 | 0 | |||||||||||||
General plant administration | 0 | 40 | 12,000 | 0 | 0 | |||||||||||||
Cafeteria: operating loss | 0 | 10 | 5,000 | 3,000 | 0 | |||||||||||||
Storeroom | 0 | 5 | 6,000 | 2,000 | 0 | |||||||||||||
Machining | 8,000 | 55 | 22,000 | 13,000 | 6,000 | |||||||||||||
Assembly | 32,000 | 140 | 202,500 | 26,000 | 4,000 | |||||||||||||
Total | 40000 | 250 | 250000 | 44000 | 10000 | |||||||||||||
1. Using the step-down method, allocate support-department costs. Develop overhead rates per direct | ||||||||||||||||||
manufacturing labor-hour for machining and assembly. Allocate the costs of the support departments | ||||||||||||||||||
in the order given in this problem. Use the allocation base for each support department you think is | ||||||||||||||||||
most appropriate. | ||||||||||||||||||
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Rating:
5/
Solution: COST ACCOUNTING-Cost allocation to divisions. Holbrook Corporation has three divisions