Corinth Ltd. consists of four departments: personnel and purchasing, which are service departments; and machining and painting, which are production departments. Budgeted data for the year consisted of the following:

Required:
a. Allocate the two service departments' costs using the sequential allocation method and develop departmental overhead rates for each of the production departments using the most logical base for each department.
b. Calculate and give the journal entry to record the total amount of under- or overapplied overhead for the company, assuming the following actual results for the year:

c. Briefly discuss reasons for allocating service department costs.

Transcribed Image Text:

Machining Painting Item Personnel Purchasing Overhead costs Number of employees Machine hours Direct labour costs Purchase requisitions $40,000 $35,000 $128,000 S48,000 138 15 25 23,500 29 sO $0 $32,000 2,650 $147,000 450 Machining Painting Overhead costs Direct labour costs Machine hours $ 78,540 S173,000 $ 38,300 24,150 $139,750 29