Refer to Cornerstone Exercise 7.3 and solve for the allocated costs to Fabricating and Assembly using the direct method of support department cost allocation. The Fabricating Department overhead rate is based on normal activity of 82,000 machine hours. The Assembly Department overhead rate is based on normal activity of 160,000 direct labor hours.
Job 316 required six machine hours in Fabricating and four direct labor hours in Assembly.
Total direct materials cost $120, and total direct labor cost was $80.
In exercise Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.

The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of square footage. Valron Company uses the direct method of support department cost allocation
Required:
1. Calculate the overhead rate for Fabricating based on machine hours and the overhead rate for Assembly based on direct labor hours.
2. Using the overhead rates calculated in Requirement 1, calculate the cost of Job 316.
3. What if Job 316 had required one machine hour in Fabricating and four direct labor hours in Assembly? Direct labor and direct materials costs remained the same. Calculate the new cost of Job 316.

Transcribed Image Text:

Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs Normal activity: 160,000 S340,000S $114,600 $93,000 Number of employees Square footage 80 5,700 170 13.300 60 1,000