BTS Company has two main departments in the plant site namely Producing department (main) and the Servicing department (support).Jin is allocated based on the machine hours while Suga is allocated based on direct labor hours Under the direct method, how much is the total overhead cost of Jimin? Producing Departments / Main DepartmentServicing DepartmentsTotalJKVJiminJinSugaP80,000.00Overhead costsP385,000.00P198,500.00P225,800.00P75,200.00P964,500.00Machine hours2,0001,8001,2006004006,000Direct labor hours1,000500500500400.02,900

The following computations are done for BTS Company.

BTS Company has two main departments in the plant site namely Producing department (main) and the Servicing department (support). Jin is allocated based on the machine hours while Suga is allocated based on direct labor hours Under the direct method, how much is the total overhead cost of Jimin?

BTS Company has two main departments in the plant site namely Producing department (main) and the Servicing department (support). Jin is allocated based on the machine hours while Suga is allocated based on direct labor hours Under the direct method, how much is the total overhead cost of Jimin?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 23E: Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating...

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

BTS Company has two main departments in the plant site namely Producing department (main) and the Servicing department (support).

Jin is allocated based on the machine hours while Suga is allocated based on direct labor hours

Under the direct method, how much is the total overhead cost of Jimin?

Producing Departments / Main Department
Servicing Departments
Total
JK
V
Jimin
Jin
Suga
P80,000.00
Overhead costs
P385,000.00
P198,500.00
P225,800.00
P75,200.00
P964,500.00
Machine hours
2,000
1,800
1,200
600
400
6,000
Direct labor hours
1,000
500
500
500
400.0
2,900

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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