Indirect Cost Allocation:Direct Method Sprint Manufacturing Company has two prod
ID: 2558609 • 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:
(a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments.
b) Determine the total departmental overhead costs for the Melting and Molding Departments.
Melting $
Molding $
(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 $
Molding $
Explanation / Answer
Solution a:
Solution b:
Total departmental overhead cost = Direct overhead cost of department + Allocated overhead
Melting = $180,000 + $44,044 = $224,044
Molding = $400,000 + $90,956 = $490,956
Solution c:
Overhead rate of melting (Machine hours) = Total overhead cost of department / Nos of machine hours
= $224,044 / 10000 = $22.40 per machine hours
Overhead rate of molding ( Direct labor hours) = Total overhead cost of department / Nos of direct labor hours
= $490,956 / 20000 = $24.55 per labor hour
Schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments - Sprint Manufacturing Department Total Overhead Allocation base Allocation to Melting Allocation to Moulding General Plant Management $100,000.00 Number of production Employees (30:55) $35,294 $64,706 Plant Security $35,000.00 Space Occupied (1:3) $8,750 $26,250 Total $135,000.00 $44,044 $90,956