Indirect Cost Allocation: Direct Method Sprint Manufacturing Company has two pro
ID: 2557269 • Letter: I
Question
Indirect Cost Allocation: Direct Method Sprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded: Melting Department direct overhead $180,000 Molding Department direct overhead 400,000 General plant management 100,000 Plant security 35,000 Other pertinent data follow: Melting Molding Number of employees 30 55 Space occupied (square feet) 10,000 30,000 Machine hours 10,000 2,000 Direct labor hours 4,000 20,000 (a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments. Department Total Melting Molding General Plant Management $ Answer $ Answer $ Answer Plant security $ Answer $ Answer $ Answer (b) Determine the total departmental overhead costs for the Melting and Molding Departments. Melting $ Answer Molding $ Answer (c) Assuming the Melting Department uses machine hours and the Molding Department uses direct labor hours to apply overhead to production, calculate the overhead rate for each production department. (Round your answers to two decimal places.) Melting $ Answer Molding $ Answer
Explanation / Answer
REQ A. SCHEDULE SHOWING OVERHEADS ALLOCATION MELTING MOLDING GENERAL PLANT Overheads cost 180000 400000 100000 35000 General plant Mgt cost 35294 64706 -100000 ($ 100,000 in 30:55) Plant Ssecurity cost 8750 26250 -35000 REQ B. TOTAL DEPARTMENT OVERHEADS COST: MELTING MOLDING GENERAL PLANT PLANT SECURITY Overheads cost 180000 400000 100000 35000 Add: General plant Mgt cost 35294 64706 -100000 ($ 100,000 in 30:55) Add: Plant Ssecurity cost 8750 26250 -35000 ($35000 in 10000:30000) Total Overheads 224044 490956 0 0 REQ C: OVERHEADS RATE MELTING MOLDING Total Overheads 224044 490956 Divide: Machine hours 10000 Divide: labour hours 20000 OH rate 22.4 24.55 Per MH Per DLH