Required: (for peso value round off to P1.00; two decimal places for percentage)Using the step down method, allocate service department costs to producingdepartments and calculate the overhead rates for each producing department follows:Quickies Services, Inc. shows the following estimated operating statistics for thisyear:Service Centers:CafeteriaPersonnelCafeteriaPersonnelPersonnelProcessedDept. QDept.SDept. T2015Producing DepartmentsDept. Q80Dept. S20Dept. T10Budgeted overhead costs for the year and the cost drivers for each departmentsOverheadCost DriverP200,000No. of employees100,000No. of personnel processed800,000No. ofemployees900600250300,0002550600,000Direct laborHours100,000 DLH150,000 DLH50,000 DLHDirect labor hoursDirect labor hoursDirect labor hours

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Required: (for peso value round off to P1.00; two decimal places for percentage) Using the step down method, allocate service department costs to producing departments and calculate the overhead rates for each producing department

Required: (for peso value round off to P1.00; two decimal places for percentage) Using the step down method, allocate service department costs to producing departments and calculate the overhead rates for each producing department

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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Concept explainers

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.

Question

Required: (for peso value round off to P1.00; two decimal places for percentage)

Using the step down method, allocate service department costs to producing

departments and calculate the overhead rates for each producing department

follows:
Quickies Services, Inc. shows the following estimated operating statistics for this
year:
Service Centers:
Cafeteria
Personnel
Cafeteria
Personnel
Personnel
Processed
Dept. Q
Dept.S
Dept. T
20
15
Producing Departments
Dept. Q
80
Dept. S
20
Dept. T
10
Budgeted overhead costs for the year and the cost drivers for each departments
Overhead
Cost Driver
P200,000
No. of employees
100,000
No. of personnel processed
800,000
No. of
employees
900
600
250
300,000
25
50
600,000
Direct labor
Hours
100,000 DLH
150,000 DLH
50,000 DLH
Direct labor hours
Direct labor hours
Direct labor hours

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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