Mammoth Mats has two service departments (maintenance and administration) and two operating departments (fabrication and assembly). Management uses machine hours to allocate maintenance costs in each department and direct labor cost to allocate administration costs. The following data appear on the company records for the current period: Machine hours Direct labor cost Department direct costs Maintenance Administration Fabrication Assembly $5,000 $20,000 500 $30,000 1,500 1,000 $10,000 $10,000 $40,000 $60,000 If the direct method of allocating service costs is used, how much service cost will be allocated to the assembly department? (Round your answer.)

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Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.