Perkins Lumber has recently put in an activity-based costing (ABC) system. It wants to use it to assign the costs of its personnel and accounting departments to the two revenue centers, Lumber and Building Supplies. The personnel department is driven by number of employees while Accounting is driven by number of transactions. The following table summarizes the data for the company.

REQUIRED:

a. Assign all of the support overhead to the revenue centers using direct cost assignment.

b. Assign all of the support overhead using sequential assignments.

c. Assign all of the support overhead using reciprocal assignments.

d. Develop overhead rates per direct labor hour for the revenue centers. Assume each employee works 2,000 hours per year.

e. Which method of assigning overhead is best? Why?

Transcribed Image Text:

Building Personnel Accounting Lumber Supplies Overhead $200,000 $250,000 $300,000 $275,000 Number of employees -0- 4 6. 10 Number of transactions 10,000 -0- 45,000 45,000