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. The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the overhead costs to the producing departments using the sequential method. Carry out allocation ratios to four decimal places. Use these numbers for subsequent calculations. Round allocated costs to the nearest dollar. If an amount is zero, enter "0". Allocation ratios: Power General Factory Purchasing Pesticide Liquid Fertilizer Square feet Machine hours Purchase orders Cost allocation: Power General Factory Purchasing Pesticide Liquid Fertilizer Direct costs $ $ $ $ $ General Factory Purchasing Power Total $ $ $ $ $ 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.) 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

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Sequential Method

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.

The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost.

Required:

1. Allocate the overhead costs to the producing departments using the sequential method. Carry out allocation ratios to four decimal places. Use these numbers for subsequent calculations. Round allocated costs to the nearest dollar. If an amount is zero, enter "0".

Allocation ratios:

	Power	General Factory	Purchasing	Pesticide	Liquid Fertilizer
Square feet
Machine hours
Purchase orders

Cost allocation:

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

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

	Overhead Rates
Pesticide	$ per machine hour
Liquid Fertilizer	$ per machine hour

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