Service Department Cost Allocation Presented below are certain operating data for the four departments of Modern Manufacturing C

Question

2 years ago

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Service Department Cost Allocation Presented below are certain operating data for the four departments of Modern Manufacturing C

ompany.
Service Production
1 2 1 2
Total manufacturing overhead
costs either identifiable with
or allocated to each department $45,000 $60,000 $55,000 $116,000
Square feet of factory
floor space $90,000 $45,000
Number of factory workers 20 60
Planned direct labor hours for the year 25,000 32,000
Allocate, to the two production departments, the costs of service departments 1 and 2, using factory floor space and number of workers, respectively, as bases. Do not round bases when calculating reallocations of service departments.
Production
Departments 1 2
Identifiable and allocated overhead $55,000 $116,000
Allocation of service departments:
Dept. 1: Factory floor space $30,000 $15,000
Dept. 2: Number of factory workers $15,000 $45,000
Total manufacturing overhead $100,000 $176,000
What is the apparent overhead rate for each production department if planned direct labor hours are overhead application base?

Business

1 answer:

Triss [41] · Answer 1 · 2023-06-12T04:52:13+03:00

Answer:

1. Production

1 2

Identifiable and $55,000 $116,000

Allocated Overhead

Reallocation of Service Department

Department 1 $30,000 $15,000

Department 2 $15,000 $45,000

Total Manufacturing Overhead $100,000 $176,000

Workings

Production

1 2

Identifiable and $55,000 $116,000

Allocated Overhead

Reallocation of Service

Department

Dept 1 45,000*90,000 45,000*45,000

135,000 135,000

Dept 2 60,000*20 60,000 * 60

80 80

Total Manufacturing $100,000 $176,000

Overhead

2. Allocated Based on Labor hours

Production 1 = $100,000 / 25,000 = $4 per direct labor hour

Production 2 = $176,000 / 32,000 = $5.5 per direct labor hour