Sunrise Development makes various types of modular homes for the housing market. The company has two support departments, Personnel and Finance, and two producing departments: Cutting and Assembly. The overhead costs for the coming year for the four departments, and their share of usage of support services, is in the following table.

REQUIRED:

a. Determine the amount of Personnel and Finance to be charged to the two producing centers using direct allocation.

b. Determine the amount of Personnel and Finance to be charged to the two producing centers using sequential allocation.

c. Determine the amount of Personnel and Finance to be charged to the two producing centers using reciprocal allocation.

d. If Cutting works 6,000 hours a year and Assembly 12,000 hours, what would be the overhead rate per hour worked under each of the three overhead charging schemes suggested above?

e. What allocation method should be used? Why?

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Personnel Finance Cutting A ssembly Overhead $ 250,000 $ 300,000 $ 450,000 $ 550,000 % Personnel Used -0- 20% 30% 50% % Finance Used 15% -0- 30% 55%