Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows

12-49 Direct and Step-Down Methods of Allocation

Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows:

Building and grounds $ 20,000
Personnel 1,200
General factory administration* 28,020
Cafeteria operating loss 1,430
Storeroom 2,750
Machining 35,100
Assembly 56,500
Total $145,000

*To be allocated before cafeteria.

Management has decided that the most sensible product costs are achieved by using departmental overhead rates. These rates are developed after allocating appropriate service department costs to production departments.

Cost-allocation bases for allocation are to be selected from the following data:
Square Feet of Direct-Labor Number of Floor Space Total Number of Department Hours Employees Occupied Labor Hours Requisitions
Building and grounds — — — — —
Personnel* — — 2,000 — —
General factory administration — 35 7,000 — —
Cafeteria operating loss — 10 4,000 1,000 —
Storeroom — 5 7,000 1,000 —
Machining 5,000 50 30,000 8,000 3,000
Assembly 15,000 100 50,000 17,000 1,500
20,000 200 100,000 27,000 4,500

*Basis used is number of employees.

1. Allocate service department costs by the step-down method. Develop overhead rates per direct labor hour for machining and assembly.
2. Same as in number 1, using the direct method.
3. What would be the plantwide factory-overhead application rate, assuming that direct-labor hours are used as a cost-allocation base?
4. Using the following information about two jobs, prepare three different total overhead costs for each job, using rates developed in numbers 1, 2, and 3.
Direct-Labor Hours
Machining Assembly
Job K10 19 2
Job K12 3 18

Click here for the solution: Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows

3-46 (Job bid price, direct, sequential, and reciprocal allocations) Small Pump Manufacturer

3-46 (Job bid price, direct, sequential, and reciprocal allocations) Small Pump Manufacturer Service Departments Production Departments Item Maintenance Power Casting Assembly Support Costs $750,000 $450,000 $150,000 $110,000 Machine Hours 0 80000 80000 40000 Kilowatt-hours 40000 0 200000 160000 Direct Labor Hours 0 0 100000 60000 Management allocates maintenance department costs using machine hours Management allocates power deptepartment costs using kilowatt hours Separate cost driver rates are determined on machine hours basis for casting dept and on direct labor hours basis for assembly dept 1 machine hour per pump manufacture in casting department .5 labor hours to assemble pump in assembly dept Direct labor and material costs = $32.00 per pump Potential Sell: 2 year contract to purchase 1000 pumps every month Add 25% markup to full manufacturing cost to determine bid BID PRICE for. a) Direct Method b) Sequential Method begins by allocating maintenance department costs c) Reciprocal Method
Click here for the solution: 3-46 (Job bid price, direct, sequential, and reciprocal allocations) Small Pump Manufacturer