Academy allocates support dept costs to production departments befoe establishing predetermined overhead rates for use in product costing.  Assembly uses machine hours as a base and expects to use 90,000 MH this year. Testing uses direct labor hours and expects to use 160,000 DLH this year.  Academy allocates support dept. costs to Assembly and Testing before their pre-determined rate. Support costs are allocated to productive depts. based on time of service while IT costs are allocated based on IT hours.  Dept EngSupport IT Assembly Testing Total Dept Overhead  $       2,000,000  $       1,000,000  $       3,000,000  $       2,000,000  $       8,000,000 Time of Service                        40                        50                      700                      450                  1,240 IT Hours                  1,000                  2,000                  9,000                11,000                23,000   A. Complete a cost allocation table using the step method.  B. Calculate the predetermined overhead rates for the productive departments (Assembly / Testing).

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Academy allocates support dept costs to production departments befoe establishing predetermined overhead rates for use in product costing. 

Assembly uses machine hours as a base and expects to use 90,000 MH this year. Testing uses direct labor hours and expects to use 160,000 DLH this year. 

Academy allocates support dept. costs to Assembly and Testing before their pre-determined rate. Support costs are allocated to productive depts. based on time of service while IT costs are allocated based on IT hours. 

Dept EngSupport IT Assembly Testing Total
Dept Overhead  $       2,000,000  $       1,000,000  $       3,000,000  $       2,000,000  $       8,000,000
Time of Service                        40                        50                      700                      450                  1,240
IT Hours                  1,000                  2,000                  9,000                11,000                23,000

 

A. Complete a cost allocation table using the step method. 

B. Calculate the predetermined overhead rates for the productive departments (Assembly / Testing). 

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