Peter Senen Corporation distributes its service department overhead costs directly to producing department. Information for January 2020 is presented below: Maintenance Utilities FOH Cost 93,500 45,000 Service provided to Maintenance 10% Utilities 20% Mixing 40% 30% Assembly 40% 60%

Peter Senen Corporation distributes its service department overhead costs directly to producing department. Information for January 2020 is presented below: Maintenance Utilities FOH Cost 93,500 45,000 Service provided to Maintenance 10% Utilities 20% Mixing 40% 30% Assembly 40% 60%

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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Question

Determine the amount of Factory overhead cost of service departments allocated to producing department using Step method

Peter Senen Corporation distributes its service department overhead costs directly to producing
department. Information for January 2020 is presented below:
Maintenance
Utilities
FOH Cost
93,500
45,000
Service provided to
Maintenance
10%
Utilities
20%
Mixing
40%
30%
Assembly
40%
60%

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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