FSI Company allocates support department costs to production departments before catabolizing predetermined overhead rates for use in product costing.

Cutting uses machine hours as a base for overhead allocation and expects to use 120,000 MH this year. Finishing uses direct labor hours as a base for overhead allocation and expects to use 250,000 DLH this year.

FSI allocates support department costs to the Cutting Department and Finishing Departments before determining their pre-determined MO Rate

EngSupport costs are allocated to productive departments based on time of service while IT costs are allocated based on IT hours.

Department	Engsupport	IT	Cutting	Finishing	Total
Departmental overhead	$2,000,000	$1,500,000	$3,000,000	$2,500,000	$9,000,000
Time of service	40	80	600	420	1140
IT Hours	1,000	2,000	12,000	8,000	23,000

During the year, Job 30-1 is completed. The job required:

	Cutting	finishing
DLH	200	350
MH	250	100

Required:

1. Complete a cost allocation calculation/table using the step method to put all overhead amounts into the productive departments.
2. 
   
3. Calculate the predetermined overhead rates for the productive departments.
4. 
   
5. Calculate the total overhead applied to Job 30-1
6. 
   
7. Explain how accountants could change two decisions related to support Department allocations and/or overhead allocations based on predetermined rales, to change the cost charged to this job.

Answer rating: 100% (QA)

To complete the cost allocation calculation using the step method and answer the subsequent questions we need to follow the steps outlined below Step 1 Allocate the support department costs based on t... View the full answer