Pineapples Inc. has four operating departments that receive support from Information Systems Technology department. Below is the IT hours each department plans to use (Expected Usage) and its Actual Usage of the support department. Dept A Dept B Dept C Expected Usage 500 300 200 Actual Usage 560 200 240 The Information Systems department has estimated its overhead costs as follows: Fixed Overhead of $12,000 and Variable Overhead of $8,000 (variable rate of $8.00 per IT Hour). If Pineapples uses a Single Rate based on Budgeted Usage, how much support costs will be allocated to Department A?

Pineapples Inc. has four operating departments that receive support from Information Systems Technology department. Below is the IT hours each department plans to use (Expected Usage) and its Actual Usage of the support department. Dept A Dept B Dept C Expected Usage 500 300 200 Actual Usage 560 200 240 The Information Systems department has estimated its overhead costs as follows: Fixed Overhead of $12,000 and Variable Overhead of $8,000 (variable rate of $8.00 per IT Hour). If Pineapples uses a Single Rate based on Budgeted Usage, how much support costs will be allocated to Department A?

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 28E: Minor Co. has a job order cost system and applies overhead based on departmental rates. Service...

See similar textbooks

Similar questions

John Sheng, a cost accountant at Starlet Company, is developing departmental factory overhead application rates for the companys Tooling and Fabricating departments. The budgeted overhead for each department and the data for one job are as follows: Using the departmental overhead application rates, total overhead applied to Job 231 in the Tooling and Fabricating departments will be: a. 225. b. 303. c. 537. d. 671.
Plata Company has identified the following overhead activities, costs, and activity drivers for the coming year: Plata produces two models of microwave ovens with the following activity demands: The companys normal activity is 21,000 machine hours. Calculate the total overhead cost that would be assigned to Model X using an activity-based costing system: a. 230,000 b. 240,000 c. 280,000 d. 190,000
Steeler Towel Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using: A. Direct labor hours B. Direct labor dollars C. Machine hours
Lansing. Inc., provided the following data for its two producing departments: Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 30,000 units of Form A produced and sold and 50,000 of Form B. Required: 1. Calculate the overhead rates for each department. 2. Using departmental rates, assign overhead to live two products and calculate the overhead cost per unit. How does this compare with the plantwide rate unit cost, using direct labor hours? 3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates, and compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?
Cynthia Rogers, the cost accountant for Sanford Manufacturing, is preparing a management report that must include an allocation of overhead. The budgeted overhead for each department and the data for one job are as follows: Using the departmental overhead application rates, and allocating overhead on the basis of direct labor hours, overhead applied to Job 231 in the Tooling Department would be: a. 44.00. b. 197.50. c. 241.50. d. 501.00.
A manufacturing company has two service and two production departments. Human Resources and Machine Repair are the service departments. The production departments are Grinding and Polishing. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The human resources department services all departments of the company, and its costs are allocated using the numbers of employees within each department, while machine repair costs are allocable to Grinding and Polishing on the basis of machine hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The building maintenance department services all departments of the company, and its costs are allocated using floor space occupied, while factory office costs are allocable to Assembly and Machining on the basis of direct labor hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
Evans, Inc., has a unit-based costing system. Evanss Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials. The plant has used direct labor hours for years to assign overhead to products. To help design engineers understand the assumed cost relationships, the Cost Accounting Department developed the following cost equation. (The equation describes the relationship between total manufacturing costs and direct labor hours; the equation is supported by a coefficient of determination of 60 percent.) Y=5,000,000+30X,whereX=directlaborhours The variable rate of 30 is broken down as follows: Because of competitive pressures, product engineering was given the charge to redesign products to reduce the total cost of manufacturing. Using the above cost relationships, product engineering adopted the strategy of redesigning to reduce direct labor content. As each design was completed, an engineering change order was cut, triggering a series of events such as design approval, vendor selection, bill of materials update, redrawing of schematic, test runs, changes in setup procedures, development of new inspection procedures, and so on. After one year of design changes, the normal volume of direct labor was reduced from 250,000 hours to 200,000 hours, with the same number of products being produced. Although each product differs in its labor content, the redesign efforts reduced the labor content for all products. On average, the labor content per unit of product dropped from 1.25 hours per unit to one hour per unit. Fixed overhead, however, increased from 5,000,000 to 6,600,000 per year. Suppose that a consultant was hired to explain the increase in fixed overhead costs. The consultants study revealed that the 30 per hour rate captured the unit-level variable costs; however, the cost behavior of other activities was quite different. For example, setting up equipment is a step-fixed cost, where each step is 2,000 setup hours, costing 90,000. The study also revealed that the cost of receiving goods is a function of the number of different components. This activity has a variable cost of 2,000 per component type and a fixed cost that follows a step-cost pattern. The step is defined by 20 components with a cost of 50,000 per step. Assume also that the consultant indicated that the design adopted by the engineers increased the demand for setups from 20,000 setup hours to 40,000 setup hours and the number of different components from 100 to 250. The demand for other non-unit-level activities remained unchanged. The consultant also recommended that management take a look at a rejected design for its products. This rejected design increased direct labor content from 250,000 hours to 260,000 hours, decreased the demand for setups from 20,000 hours to 10,000 hours, and decreased the demand for purchasing from 100 component types to 75 component types, while the demand for all other activities remained unchanged. Required: 1. Using normal volume, compute the manufacturing cost per labor hour before the year of design changes. What is the cost per unit of an average product? 2. Using normal volume after the one year of design changes, compute the manufacturing cost per hour. What is the cost per unit of an average product? 3. Before considering the consultants study, what do you think is the most likely explanation for the failure of the design changes to reduce manufacturing costs? Now use the information from the consultants study to explain the increase in the average cost per unit of product. What changes would you suggest to improve Evanss efforts to reduce costs? 4. Explain why the consultant recommended a second look at a rejected design. Provide computational support. What does this tell you about the strategic importance of cost management?
Your Companey has two service departments – Personnel and Maintenance. The Maintenance Department's costs of $160,000 are allocated on the basis of standard hours used. The Personnel Department's costs of $40,000 are allocated based on the number of employees. The costs of the operating Departments A and B are $80,000 and $120,000, respectively. Data on standard service hours and number of employees are as follows: Standard Service Maintenance Dept. Personnel Dept. Production Depts. A B Hours used - 400 480 320 Number of Employees 20 - 80 240 What is the cost of the Maintenance Department allocated to Department B using the direct method? What is the cost of the…
University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine hours in each department and personnel costs on the basis of labor-hours worked by the employees in each. The following data appear in the company records for the current period: Maintenance Pernonnel Printing Developing 1,400 Machine-hours 1,400 900 4, 200 Labor-hour Department direct costs 900 62, e00 3,100 $11, 700 $12, 800 $14, 500 Required: Use the direct method to allocate these service department costs to the operating departments. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) Maintenance Personnet Printing Developing Service department costs Maintenance allocation Personnel allocation Total costs allocated
Western Services has three service departments: Information Systems (IS), Personnel, and Administration. There are two operating departments: Residential and Commercial. A summary of costs and other data for each department prior to allocation of service department costs for the latest period follows: Department Information Systems (IS) Personnel Administration IS 170 115 3,900 Number of IS service tickets Number of employees Square footage occupied The costs of the service departments and the allocation basis for each department follow. Direct Cost $ 33,000 40,000 36,700 Personnel 200 120 8,000 Administration Residential Commercial 155 1,410 107 138 3,800 16,100 Allocation Base IS service tickets Employees Square footage occupied. 940 162 69,500 Required: a. Assume that the company allocates service department costs to production departments using the direct method. What amount of Information Systems (IS) Department costs will be allocated to the Commercial Department? b. Assume the…
The management of Winterroth Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The Corporation's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours. Estimated at the Beginning of the Year Сapacity Actual Machine-hours 53,000 63,000 49,000 Manufacturing overhead $1,803,060 $1,803,060 $1,803,060 If the Corporation bases its predetermined overhead rate on capacity, then as shown on the income statement prepared for internal management purposes, the cost of unused capacity would be closest to: Multiple Choice $286,200 $400,680 $264,600 $136,080