Rabia Company has two support departments, Humon Resources and Maintenance, and two producing deportments, Fabrication and Assembly Support Departments Producing Departments Human Resources Maintenance Fabrication Assembly Budgeted overhead Direct labor hours $40,000 $72,000 $140,000 $160,000 2,000 2,500 8,000 10,000 Machine hours 12,000 8,000 Number of employees 4 15 25 The company only had mixed cost. Human Resource costs are allocated bosed on the number of employees. and maintenance costs are allocated bosed on machine hours. Predetermined overhead rates for fabrication and assembly are based on direct labor hours. Required: 1. Calculate the allocation ratios. 2. Using the direct method, allocate the costs of the Human Resources and Maintenance deportments to the Fabrication and Assembly departments. Also write the final cost of both the production deportments. 3. What if the Maintenance Department had 50 employees? How would that offect the allocation of Human Resources Department costs to the Fabricotion and Assembly deportments?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Rabia Company has two support departments, Human Resources and Maintenance, and two producing
departments, Fabrication and Assembly
Support Departments
Producing Departments
Human Resources Maintenance
Fabrication
Assembly
Budgeted overhead
Direct labor hours
Machine hours
Number of employees
$40,000
$72,000
$140,000
$160,000
2,000
2,500
8,000
10,000
12,000
8,000
4
5
15
25
The company only had mixed cost. Human Resource costs are allocated based on the number of employees,
and maintenance costs are allocated based on machine hours. Predetermined overhead rates for fabrication
and assembly are based on direct labor hours.
Required:
1. Calculate the allocation ratios.
2. Using the direct method, allocate the costs of the Human Resources and Maintenance deportments to the
Fabrication and Assembly departments. Also write the final cost of both the production departments.
3. What if the Maintenance Department had 50 employees? How would that affect the allocation of Human
Resources Department costs to the Fabrication and Assembly departments?
Transcribed Image Text:Rabia Company has two support departments, Human Resources and Maintenance, and two producing departments, Fabrication and Assembly Support Departments Producing Departments Human Resources Maintenance Fabrication Assembly Budgeted overhead Direct labor hours Machine hours Number of employees $40,000 $72,000 $140,000 $160,000 2,000 2,500 8,000 10,000 12,000 8,000 4 5 15 25 The company only had mixed cost. Human Resource costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours. Predetermined overhead rates for fabrication and assembly are based on direct labor hours. Required: 1. Calculate the allocation ratios. 2. Using the direct method, allocate the costs of the Human Resources and Maintenance deportments to the Fabrication and Assembly departments. Also write the final cost of both the production departments. 3. What if the Maintenance Department had 50 employees? How would that affect the allocation of Human Resources Department costs to the Fabrication and Assembly departments?
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