Indirect Cost Allocation: Direct MethodSprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded:Melting Department overhead$110,000Molding Department overhead400,000General plant management100,000Plant security50,000Other pertinent data follow: MeltingMoldingNumber of employees3540Space occupied (square feet)10,00020,000Machine hours10,0002,000Direct labor hours4,00020,000 a. Prepare a schedule allocating general plant management costs and plant security costs to the Meltingand Molding Departments. DepartmentTotalMeltingMoldingGeneral Plant Management Plant security b. Determine the total departmental overhead costs for the Melting and Molding Departments.Use rounded answers to compute total departmental overhead costs for each department.Melting $0Molding $0 c. Assuming the Melting Department uses machine hours and the Molding Department uses direct laborhours to apply overhead to production, calculate the overhead rate for each production department. Use rounded answers to compute and then round final answers to two decimal places.Melting $0Molding $0

A) Schedule Allocating General plant management and Plant security cost Particulars Total Melting Molding General plant management $100000 $46667 $53333 Plant security $50000 $16667 $33333 Working - Calculation of activity rate General plant management = $100000/(35+40) = $1333.333 per employee Plant security = $50000/30000 square feet = 1.6666 $ per square feet B) Calculation of total departmental overhead costs for both the department Melting ($) Molding ($) Separate Overhead Cost 110000 400000 Allocated Cost: - General plant management 46667 53333 - Plant security 16667 33333 Total overhead Cost 173334 486666 Melting department = $173334 Molding department = $ 486666 C) Calculation of overhead rate for each production department. Melting Department Overhead Rate = Total Overhead cost / Machine hours = $173334/10000 = $17.33 per machine hour Molding department Overhead Rate = Total Overhead cost / Labor hours = $486666 / 20000 = $24.33 per labor hour. Final Answer Melting - $17.33 Molding - $24.33 .

Answered: Melting Molding

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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Indirect Cost Allocation: Direct Method

Sprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded:

Melting Department overhead	$110,000
Molding Department overhead	400,000
General plant management	100,000
Plant security	50,000

Other pertinent data follow:

	Melting	Molding
Number of employees	35	40
Space occupied (square feet)	10,000	20,000
Machine hours	10,000	2,000
Direct labor hours	4,000	20,000

a. Prepare a schedule allocating general plant management costs and plant security costs to the Meltingand Molding Departments.

Department	Total	Melting	Molding
General Plant Management
Plant security

Determine the total departmental overhead costs for the Melting and Molding Departments.Use rounded answers to compute total departmental overhead costs for each department.

Melting $

Molding $

Assuming the Melting Department uses machine hours and the Molding Department uses direct laborhours to apply overhead to production, calculate the overhead rate for each production department. Use rounded answers to compute and then round final answers to two decimal places.

Melting $

Molding $

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