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Cutting department Finishing department Maintenance department Warehousing department Factory office P 240,000 168,000 40,340 30,000 65,000 The controller also provides the following tabulation of the interdependend Services provided by Maintenance Warehousing | Factory office To Department Cutting Finishing Maintenance Warehousing Factory office 45% 50% 62% 28 32 38 10 15 12 8

Cutting department Finishing department Maintenance department Warehousing department Factory office P 240,000 168,000 40,340 30,000 65,000 The controller also provides the following tabulation of the interdependend Services provided by Maintenance Warehousing | Factory office To Department Cutting Finishing Maintenance Warehousing Factory office 45% 50% 62% 28 32 38 10 15 12 8

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 5-6. ALLOCATION OF SERVICE DEPARTMENT COSTS
Exercise 5 - 6. ALLOCATION OF SERVICE DEPARTMENT COSTS The controller of MM Company estimates that factory overhead will be as follows producing departments and three service departments. P 240,000 Cutting department Finishing department Maintenance department Warehousing department Factory office 168,000 40,340 30,000 65,000 The controller also provides the following tabulation of the interdependence of departments: Services provided by Warehousing Factory office 50% To Department Cutting Finishing Maintenance Warehousing Factory office The estimated direct labor cost for purposes of determining applied overhead rates are: Maintenance 45% 62% 28 32 38 10 15 12 8. P 300,000 Cutting department Finishing department 200,000 REQUIRED: On the basis of the foregoing information set up a schedule 1. Showing the three redistribution methods as follows: a. Direct method (Round to nearest peso) b. Step method. Distribute maintenance first. (Round to nearest peso) c. Linear algebra method 2. Compute the overhead application rate based on direct labor under each method. (Round to one decimal place only) 1. Direct Method 2. Step Method 3. Linear Algebra Method
Transcribed Image Text:Exercise 5 - 6. ALLOCATION OF SERVICE DEPARTMENT COSTS The controller of MM Company estimates that factory overhead will be as follows producing departments and three service departments. P 240,000 Cutting department Finishing department Maintenance department Warehousing department Factory office 168,000 40,340 30,000 65,000 The controller also provides the following tabulation of the interdependence of departments: Services provided by Warehousing Factory office 50% To Department Cutting Finishing Maintenance Warehousing Factory office The estimated direct labor cost for purposes of determining applied overhead rates are: Maintenance 45% 62% 28 32 38 10 15 12 8. P 300,000 Cutting department Finishing department 200,000 REQUIRED: On the basis of the foregoing information set up a schedule 1. Showing the three redistribution methods as follows: a. Direct method (Round to nearest peso) b. Step method. Distribute maintenance first. (Round to nearest peso) c. Linear algebra method 2. Compute the overhead application rate based on direct labor under each method. (Round to one decimal place only) 1. Direct Method 2. Step Method 3. Linear Algebra Method
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