Direct Method Eilers Company has two producing departments and two support departments. The following budgeted data pertain to these four departments: Support Departments Producing Departments General Factory Receiving Assembly Finishing Direct overhead $440,000 $190,000 $42,000 $72,000 Square footage — 2,300 4,600 4,600 Number of receiving orders 350 — 1,750 1,450 Direct labor hours — — 24,000 42,000 The company has decided to simplify its method of allocating support service costs by switching to the direct method. Required: 1. Allocate the costs of the support departments to the producing departments using the direct method. Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar. Use the rounded values for subsequent calculations. Allocation ratios: Assembly Finishing Square footage fill in the blank 1 fill in the blank 2 Number of receiving orders fill in the blank 3 fill in the blank 4 Allocations: Assembly Finishing General Factory $fill in the blank 5 $fill in the blank 6 Receiving fill in the blank 7 fill in the blank 8 Direct costs fill in the blank 9 fill in the blank 10 Total $fill in the blank 11 $fill in the blank 12 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.) Overhead Rate Assembly fill in the blank 13 per direct labor hour Finishing fill in the blank 14 per direct labor hour

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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Direct Method

Eilers Company has two producing departments and two support departments. The following budgeted data pertain to these four departments:

	Support Departments	Producing Departments
	General Factory	Receiving	Assembly	Finishing
Direct overhead	$440,000	$190,000	$42,000	$72,000
Square footage	—	2,300	4,600	4,600
Number of receiving orders	350	—	1,750	1,450
Direct labor hours	—	—	24,000	42,000

The company has decided to simplify its method of allocating support service costs by switching to the direct method.

Required:

1. Allocate the costs of the support departments to the producing departments using the direct method. Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar. Use the rounded values for subsequent calculations.

Allocation ratios:

	Assembly	Finishing
Square footage	fill in the blank 1	fill in the blank 2
Number of receiving orders	fill in the blank 3	fill in the blank 4

Allocations:
	Assembly	Finishing
General Factory	$fill in the blank 5	$fill in the blank 6
Receiving	fill in the blank 7	fill in the blank 8
Direct costs	fill in the blank 9	fill in the blank 10
Total	$fill in the blank 11	$fill in the blank 12

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

	Overhead Rate
Assembly	fill in the blank 13 per direct labor hour
Finishing	fill in the blank 14 per direct labor hour

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