Yekka Corporation has two producing department and two service departments labeled P1, P2, S1 and S2, respectively. Direct costs for each department and the proportion of services costs used by various departments are as follows: Cost Center Direct Costs Proportion of services used by: S1 S2 P1 P2 P1 90,000 P2 60,000 S1 20,000 - .80 .1 .1 S2 32,000 .20 - .50 .30 In calculating predetermined overhead rates, machine hours are used as the base in P1 and direct labor hours as the base in P2. P1 P2 Machine hours 50,000 40,000 Direct labor hours 40,000 20,000 Requirements: Allocate the service department costs to operating departments and compute the factory overhead rate for P1 and P2 using the following methods: Direct method Step method – start with S1 Algebraic method
Yekka Corporation has two producing department and two service departments labeled P1, P2, S1 and S2, respectively. Direct costs for each department and the proportion of services costs used by various departments are as follows:
|
Cost Center |
Direct Costs |
Proportion of services used by: |
|||
|
|
S1 |
S2 |
P1 |
P2 |
|
|
P1 |
90,000 |
|
|
|
|
|
P2 |
60,000 |
|
|
|
|
|
S1 |
20,000 |
- |
.80 |
.1 |
.1 |
|
S2 |
32,000 |
.20 |
- |
.50 |
.30 |
In calculating predetermined overhead rates, machine hours are used as the base in P1 and direct labor hours as the base in P2.
P1 P2
Machine hours 50,000 40,000
Direct labor hours 40,000 20,000
Requirements:
- Allocate the service department costs to operating departments and compute the factory overhead rate for P1 and P2 using the following methods:
- Direct method
- Step method – start with S1
- Algebraic method
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