Square feet Overhead $80,000 $314,000 3,000 Machine hours Support Departments General Power Factory Purchasing Shampoo Conditioner $169,000 $78,800 $107,700 3,000 9,600 Power 20 Cost allocation: Total 1,403 Purchase orders The company does not break overhead into fixed and variable components. The bases for allocation are power-machine hours; general factory-square feet; and purchasing-purchase orders. The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the overhead costs to the producing departments using the sequential method. Carry out allocation ratios to four decimal places. Use these numbers for subsequent calculations. Round allocated costs to the nearest dollar. If an amount is zero, enter "0". Allocation ratios: Producing Departments 40 Power Direct costs $80,00 General Factory 39,50 x Purchasing 1,345 Power General Factory Purchasing Shampoo Conditioner 0.125✔ 0.125 ✔ Square feet Machine hours O✓ 0.400✔ 0.350✔ 0.250 0.600 x Purchase orders 0.200 x 0 8,000 0✔ 60 OV $ 0✔ 8,400 0✔ 0✔ 24,000 O 120 General Factory Purchasing Shampoo Conditioner $316,0 x $169,0 $78,00 x $107,41 0.125 x 0.750 0.200 x 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.) Overhead Rates Shampoo $46.33 x per machine hour Conditioner $ per machine hour
Square feet Overhead $80,000 $314,000 3,000 Machine hours Support Departments General Power Factory Purchasing Shampoo Conditioner $169,000 $78,800 $107,700 3,000 9,600 Power 20 Cost allocation: Total 1,403 Purchase orders The company does not break overhead into fixed and variable components. The bases for allocation are power-machine hours; general factory-square feet; and purchasing-purchase orders. The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the overhead costs to the producing departments using the sequential method. Carry out allocation ratios to four decimal places. Use these numbers for subsequent calculations. Round allocated costs to the nearest dollar. If an amount is zero, enter "0". Allocation ratios: Producing Departments 40 Power Direct costs $80,00 General Factory 39,50 x Purchasing 1,345 Power General Factory Purchasing Shampoo Conditioner 0.125✔ 0.125 ✔ Square feet Machine hours O✓ 0.400✔ 0.350✔ 0.250 0.600 x Purchase orders 0.200 x 0 8,000 0✔ 60 OV $ 0✔ 8,400 0✔ 0✔ 24,000 O 120 General Factory Purchasing Shampoo Conditioner $316,0 x $169,0 $78,00 x $107,41 0.125 x 0.750 0.200 x 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.) Overhead Rates Shampoo $46.33 x per machine hour Conditioner $ per machine hour
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Machine
hours
Overhead $80,000 $314,000
Square
feet
3,000
Purchase
orders
Support
Departments
General
Power Factory Purchasing Shampoo Conditioner
$169,000 $78,800 $107,700
3,000 9,600
8,400
24,000
20
Square feet
Machine hours
Purchase orders
Total
1,403
Cost allocation:
40
Producing Departments
The company does not break overhead into fixed and variable components. The bases for allocation are power-machine hours; general factory-square feet; and purchasing-purchase orders.
The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost.
Power
$80,00
Direct costs
General Factory 39,50 x
Purchasing
Power
1,345
Required:
1. Allocate the overhead costs to the producing departments using the sequential method. Carry out allocation ratios to four decimal places. Use these numbers for subsequent calculations. Round allocated costs to the nearest dollar. If an amount is zero, enter "0".
Allocation ratios:
8,000
60
0✔ $
Power General Factory Purchasing Shampoo Conditioner
0.125 ✓
0✔
0.125 0.400 ✓ 0.350 ✓
0✔
0.250✔ 0.750✔
0✓
0.200 x
0✔
0.600 x 0.200 x
120
0✔
0
General Factory Purchasing
$316,0 x 169,0 $78,00 x
0.125 x
Shampoo Conditioner
$78,00 x $107,41 x
$ 0 $
2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)
Overhead Rates
Shampoo $46.33 x per machine hour
Conditioner
per machine hour
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1. Cost allocations are performed in step-down fashion, following a predetermined ranking procedure. Starting with the top ranking department all costs are allocated to the other support and producing departments but never back to any departments above it.
2. Total production dept. cost/ total machine hours by dept.
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