Munabhai Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing(purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan hasthe following labor hours devoted by each of the service departments to the other departments.SourcingOperationsSourcing10,000The costs incurred in the plant are as follows:DepartmentsSourcingOperationsAssemblyFinishingTotalDirect MethodAssemblyFinishingb. Step MethodaTotal Labor Hours Used by DepartmentsAssemblyOperations20,00040,00060,000AssemblyFinishingc. Reciprocal MethodRequired:1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcingdepartment that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method?2. What are the total costs in the production departments after allocation?(For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)AssemblyFinishingDepartmentalCosts$ 210,000280,000440,000285,0001,215,000Total ServiceDepartment CostAllocatedFinishing60,00050,000Total ProductionCost

The costs of production departments are allocated to the service departments using various methods…

Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has he following labor hours devoted by each of the service departments to the other departments. Sourcing Operations Sourcing 10,000 The costs incurred in the plant are as follows: Departments Sourcing Operations Assembly Total Labor Hours Used by Departments Assembly Operations 20,000 40,000 60,000 Finishing Total Departmental Costs $ 210,000 280,000 440,000 285,000 $ 1,215,000 Finishing 60,000 50,000 Required: . What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method? 2. What are the total costs in the production departments after allocation?

Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has he following labor hours devoted by each of the service departments to the other departments. Sourcing Operations Sourcing 10,000 The costs incurred in the plant are as follows: Departments Sourcing Operations Assembly Total Labor Hours Used by Departments Assembly Operations 20,000 40,000 60,000 Finishing Total Departmental Costs $ 210,000 280,000 440,000 285,000 $ 1,215,000 Finishing 60,000 50,000 Required: . What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method? 2. What are the total costs in the production departments after allocation?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 8E: A manufacturing company has two service and two production departments. Building Maintenance and...

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A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The building maintenance department services all departments of the company, and its costs are allocated using floor space occupied, while factory office costs are allocable to Assembly and Machining on the basis of direct labor hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
Lansing. Inc., provided the following data for its two producing departments: Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 30,000 units of Form A produced and sold and 50,000 of Form B. Required: 1. Calculate the overhead rates for each department. 2. Using departmental rates, assign overhead to live two products and calculate the overhead cost per unit. How does this compare with the plantwide rate unit cost, using direct labor hours? 3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates, and compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?
Minor Co. has a job order cost system and applies overhead based on departmental rates. Service Department 1 has total budgeted costs of 168,000 for next year. Service Department 2 has total budgeted costs of 280,000 for next year. Minor allocates service department costs solely to the producing departments. Service Department 1 cost is allocated to producing departments on the basis of machine hours. Service Department 2 cost is allocated to producing departments on the basis of direct labor hours. Producing Department 1 has budgeted 8,000 machine hours and 12,000 direct labor hours. Producing Department 2 has budgeted 2,000 machine hours and 12,000 direct labor hours. What is the total cost allocation from the two service departments to Producing Department 1? a. 173,600 b. 140,000 c. 134,400 d. 274,400
Pelder Products Company manufactures two types of engineering diagnostic equipment used in construction. The two products are based upon different technologies, X-ray and ultrasound, but are manufactured in the same factory. Pelder has computed the manufacturing cost of the X-ray and ultrasound products by adding together direct materials, direct labor, and overhead cost applied based on the number of direct labor hours. The factory has three overhead departments that support the single production line that makes both products. Budgeted overhead spending for the departments is as follows: Pelders budgeted manufacturing activities and costs for the period are as follows: The budgeted cost to manufacture one ultrasound machine using the activity-based costing method is: a. 225. b. 264. c. 293. d. 305.
Charlies Wood Works produces wood products (e.g., cabinets, tables, picture frames, and so on). Production departments include Cutting and Assembly. The Janitorial and Security departments support the Cutting and Assembly departments. The Assembly Department spans about 46,400 square feet and holds assets valued at about 60,000. The Cutting Department spans about 33,600 square feet and holds assets valued at about 140,000. Charlies Wood Works allocates support department costs using the direct method. If costs from the Janitorial Department are allocated based on square feet and costs from the Security Department are allocated based on asset value, determine (a) the percentage of Janitorial costs that should be allocated to the Assembly Department and (b) the percentage of Security costs that should be allocated to the Cutting Department.
Vargas, Inc., produces industrial machinery. Vargas has a machining department and a group of direct laborers called machinists. Each machinist is paid 25,000 and can machine up to 500 units per year. Vargas also hires supervisors to develop machine specification plans and to oversee production within the machining department. Given the planning and supervisory work, a supervisor can oversee three machinists, at most. Vargass accounting and production history reveal the following relationships between units produced and the costs of direct labor and supervision (measured on an annual basis): Required: 1. Prepare two graphs: one that illustrates the relationship between direct labor cost and units produced, and one that illustrates the relationship between the cost of supervision and units produced. Let cost be the vertical axis and units produced the horizontal axis. 2. How would you classify each cost? Why? 3. Suppose that the normal range of activity is between 2,400 and 2,450 units and that the exact number of machinists is currently hired to support this level of activity. Further suppose that production for the next year is expected to increase by an additional 400 units. How much will the cost of direct labor increase (and how will this increase be realized)? Cost of supervision?
The management of Nova Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Nova: Direct labor hours were estimated as follows: In addition, the direct labor hours (dlh) used to produce a unit of each product in each department were determined from engineering records, as follows: a. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the single plantwide factory overhead rate method, using direct labor hours as the activity base. b. Determine the per-unit factory overhead allocated to the gasoline and diesel engines under the multiple production department factory overhead rate method, using direct labor hours as the activity base for each department. c. Recommend to management a product costing approach, based on your analyses in (a) and (b). Support your recommendation.
Davis Snowflake Co. produces Christmas stockings in its Cutting and Sewing departments. The Maintenance and Security departments support the production of the stockings. Costs from the Maintenance Department are allocated based on machine hours, and costs from the Security Department are allocated based on asset value. Information about each department is provided in the following table: Determine the total cost of each production department after allocating all support department costs to the production departments using the reciprocal services method.
Use the following information for Brief Exercises 4-27 and 4-28: Quillen Company manufactures a product in a factory that has two producing departments, Cutting and Sewing, and two support departments, S1 and S2. The activity driver for S1 is number of employees, and the activity driver for S2 is number of maintenance hours. The following data pertain to Quillen: Brief Exercises 4-27 (Appendix 4B) Assigning Support Department Costs by Using the Direct Method Refer to the information for Quillen Company above. Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratiosone for Cutting and the other for Sewing.) 2. Allocate the support department costs to the producing departments by using the direct method.
Activity-based and department rate product costing and product cost distortions Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory overhead incurred is as follows: The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: Instructions Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 315,000 and 540,000 for the Cutting and Finishing departments, respectively. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Determine the total and per-unit cost assigned to each product under activity-based costing. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.
John Sheng, a cost accountant at Starlet Company, is developing departmental factory overhead application rates for the companys Tooling and Fabricating departments. The budgeted overhead for each department and the data for one job are as follows: Using the departmental overhead application rates, total overhead applied to Job 231 in the Tooling and Fabricating departments will be: a. 225. b. 303. c. 537. d. 671.
Gwinnett County Chrome Company manufactures three chrome-plated productsautomobile bumpers, valve covers, and wheels. These products are manufactured in two production departments (Stamping and Plating). The factory overhead for Gwinnett County Chrome is 239,200. The three products consume both machine hours and direct labor hours in the two production departments as follows: Instructions 1. Determine the single plantwide factory overhead rate, using each of the following allocation bases: (a) direct labor hours and (b) machine hours. 2. Determine the product factory overhead costs, using (a) the direct labor hour plantwide factory overhead rate and (b) the machine hour plantwide factory overhead rate.