Howard Inc. has two support departments and two producing departments. Information for each department for the year is as follows:
Support DepartmentsProducing Departments
|
Maintenance |
Personnel |
Cutting |
Assembly |
||
|
Budgeted overhead |
160,000 |
300,000 |
600,000 |
800,000 |
|
|
Direct Labor Hours |
16,000 |
2,000 |
40,000 |
50,000 |
|
|
Machine Hours |
40,000 |
10,000 |
90,000 |
30,000 |
|
|
Number of employees |
10 |
20 |
140 |
160 |
|
The company does not divide costs into fixed and variable components.
Maintenance costs are allocated based on machine hours, and pesonnel costs are allocated based on the number of employees.
Predetermined overhead rates for the producing departments are based on direct labor hours.
Required
A. Allocate the support department costs using the direct method. Calculate the pre determined overhead rate for the producing departments.
B. Allocate the support-department costs using the sequential method and starting with the Personnel Department. Calculate the predetermined overhead rate for the producing departments.
C. Allocate the support-department costs using the reciprocal method. Calculate the pre determined overhead rate for the producing departments.
