Direct Method and Overhead Rates Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows: Support Departments Producing Departments Power GeneralFactory Purchasing Pesticide LiquidFertilizer Overhead $90,000 $314,000 $167,000 $78,900 $107,800 Square feet 1,500 — 1,500 4,200 4,800 Machine hours — 1,403 1,345 24,000 8,000 Purchase orders 20 40 7 120 60 The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders. Required: 1. Allocate the overhead costs to the producing departments using the direct method. If required, round your allocation ratios to four decimal places and round allocated costs to the nearest dollar and use the rounded values for the subsequent calculations. Allocation ratios: Pesticide Liquid Fertilizer Square feet Machine hours Purchase orders Cost assignment: Pesticide Liquid Fertilizer Direct costs $ $ Power General Factory Purchasing Total $ $ 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.) Departmental overhead rates Pesticide $ per machine hour Liquid Fertilizer $ per machine hour

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

100%

Direct Method and Overhead Rates

Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:

	Support Departments	Producing Departments
	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
Overhead	$90,000	$314,000	$167,000	$78,900	$107,800
Square feet	1,500	—	1,500	4,200	4,800
Machine hours	—	1,403	1,345	24,000	8,000
Purchase orders	20	40	7	120	60

The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders.

Required:

1. Allocate the overhead costs to the producing departments using the direct method. If required, round your allocation ratios to four decimal places and round allocated costs to the nearest dollar and use the rounded values for the subsequent calculations.

Allocation ratios:

	Pesticide	Liquid Fertilizer
Square feet
Machine hours
Purchase orders

Cost assignment:

	Pesticide	Liquid Fertilizer
Direct costs	$	$
Power
General Factory
Purchasing
Total	$	$

2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)

	Departmental overhead rates
Pesticide	$ per machine hour
Liquid Fertilizer	$ per machine hour

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 6 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions