The company has two revenue centers: Retail Services and Commercial Services. Th
ID: 2547912 • Letter: T
Question
The company has two revenue centers: Retail Services and Commercial Services. There are also three service centers: Maintenance, Office Support, and Facility Support. The maintenance center supplies support to all four other centers. The Maintenance area is allocated based on maintenance work orders (Office Support: 10 work orders, Facility Support: 20 work orders, Retail Services: 25 work orders, Commercial Services: 75 work orders). The Office Support is allocated based on hours (Facility Support: 40 hours of Office Support, Retail Services: 50 hours of Office Support, Commercial Services: 200 hours of Office Support). The Facility Support is allocated based on number of customers (Retail Services: 150 customers, Commerical Services: 75 customers). Overhead rates are calculated based on the number of invoices generated (Retail Services: 40,000 invoices, Commercial Services: 10,000 invoices). Allocate overhead to the two revenue centers based on the direct method, and calculate the departmental overhead rates. Maintenance Office Support Facility Support Retail Services Commercial Services Center Costs $300,000 $125,000 $100,000 $75,000 $50,000 Maintenance Office Support Facility Support Total Overhead Rate Allocate overhead to the two revenue centers based on the step method, and calculate the departmental overhead rates. Maintenance Office Support Facility Support Retail Services Commercial Services Center Costs $300,000 $125,000 $100,000 $75,000 $50,000 Maintenance Office Support Facility Support Total Overhead Rate The company has two revenue centers: Retail Services and Commercial Services. There are also three service centers: Maintenance, Office Support, and Facility Support. The maintenance center supplies support to all four other centers. The Maintenance area is allocated based on maintenance work orders (Office Support: 10 work orders, Facility Support: 20 work orders, Retail Services: 25 work orders, Commercial Services: 75 work orders). The Office Support is allocated based on hours (Facility Support: 40 hours of Office Support, Retail Services: 50 hours of Office Support, Commercial Services: 200 hours of Office Support). The Facility Support is allocated based on number of customers (Retail Services: 150 customers, Commerical Services: 75 customers). Overhead rates are calculated based on the number of invoices generated (Retail Services: 40,000 invoices, Commercial Services: 10,000 invoices). Allocate overhead to the two revenue centers based on the direct method, and calculate the departmental overhead rates. Maintenance Office Support Facility Support Retail Services Commercial Services Center Costs $300,000 $125,000 $100,000 $75,000 $50,000 Maintenance Office Support Facility Support Total Overhead Rate Allocate overhead to the two revenue centers based on the step method, and calculate the departmental overhead rates. Maintenance Office Support Facility Support Retail Services Commercial Services Center Costs $300,000 $125,000 $100,000 $75,000 $50,000 Maintenance Office Support Facility Support Total Overhead RateExplanation / Answer
Answer a. Service Department Cost Allocation Statement Under Direct Method Service Revenue Maintenance Office Support Facility Support Retail Services Commercial Services Budgeted Overhead Costs 300,000 125,000 100,000 75,000 50,000 Allocation of Maintenace (300,000) 75,000 225,000 Allocation of Office Support (125,000) 25,000 100,000 Allocation of Facility support (100,000) 66,667 33,333 Total Allocated Costs - - - 241,667 408,333 No of Invoices 40,000 10,000 Overhead Rate (per Invoice) 6.04 40.83 Allocation of Maintenace Retail Services - $300,000 X 25/100 75,000 Commercial Services - $300,000 X 75/100 225,000 Total 300,000 Allocation of Office Support Retail Services - $125,000 X 50/250 25,000 Commercial Services - $125,000 X 200/250 100,000 Total 125,000 Allocation of Facility Support Retail Services - $100,000 X 150/225 66,667 Commercial Services - $100,000 X 75/225 33,333 Total 100,000 Answer a & C. Support Department Cost Allocation Statement Under Step Down Method Service Revenue Maintenance Office Support Facility Support Retail Services Commercial Services Budgeted Overhead Costs 300,000 125,000 100,000 75,000 50,000 Allocation of Maintenace (300,000) 23,077 46,154 57,692 173,077 Allocation of Office Support (148,077) 20,424 25,531 102,122 Allocation of Facility support (166,578) 111,052 55,526 Total Allocated Costs - (0) 0 269,275 380,725 No of Invoices 40,000.00 10,000.00 Overhead Rate (per Invoice) 6.73 38.07 Allocation of Maintenance: Work Order Weighted Base Allocated Cost Office Support 10 7.69% 23,077 Facility Support 20 15.38% 46,154 Retail Services 25 19.23% 57,692 Commercial Services 75 57.69% 173,077 Total 130 100.00% 300,000 Allocation of Office Support: Hours Weighted Base Allocated Cost Facility Support 40 13.79% 20,424 Retail Services 50 17.24% 25,531 Commercial Services 200 68.97% 102,122 Total 290 100.00% 148,077 Allocation of Facility Support: No. of Customer Weighted Base Allocated Cost Retail Services 150 66.67% 111,052 Commercial Services 75 33.33% 55,526 Total 225 100.00% 166,578