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Moon Furniture had the following budgeted overhead costs: Service Departments Production Departments Power $480,000 30 3,000 Cost # Employees Floor space (sq ft) Machine Hours Maintenance $300,000 30 2,000 Assembly $600,000 70 18,000 50,000 Finishing $800,000 140 9,000 40,000 Traditionally, Power cost is allocated based on number of employees, and Maintenance cost is allocated based on floor space.

Moon Furniture had the following budgeted overhead costs: Service Departments Production Departments Power $480,000 30 3,000 Cost # Employees Floor space (sq ft) Machine Hours Maintenance $300,000 30 2,000 Assembly $600,000 70 18,000 50,000 Finishing $800,000 140 9,000 40,000 Traditionally, Power cost is allocated based on number of employees, and Maintenance cost is allocated based on floor space.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The Direct Method Moon Furniture had the following budgeted overhead costs: Production Departments Cost # Employees Floor space (sq ft) Machine Hours Service Departments Power $480,000 30 3,000 Maintenance $300,000 30 2,000 Assembly $600,000 70 18,000 50,000 Finishing $800,000 140 9,000 40,000 Traditionally, Power cost is allocated based on number of employees, and Maintenance cost is allocated based on floor space. Required: 1. Allocate the cost of the service departments to the production departments using the direct method. 2. Calculate the departmental overhead rate for Assembly and Finishing, assuming machine hour is the cost driver for both departments. 3. What if Power cost is allocated based on floor space, and Maintenance cost is allocated based on number of employees?
Transcribed Image Text:The Direct Method Moon Furniture had the following budgeted overhead costs: Production Departments Cost # Employees Floor space (sq ft) Machine Hours Service Departments Power $480,000 30 3,000 Maintenance $300,000 30 2,000 Assembly $600,000 70 18,000 50,000 Finishing $800,000 140 9,000 40,000 Traditionally, Power cost is allocated based on number of employees, and Maintenance cost is allocated based on floor space. Required: 1. Allocate the cost of the service departments to the production departments using the direct method. 2. Calculate the departmental overhead rate for Assembly and Finishing, assuming machine hour is the cost driver for both departments. 3. What if Power cost is allocated based on floor space, and Maintenance cost is allocated based on number of employees?
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