Jackson Instrument Company manufactures gauges for the construction industry. The company has two production departments: Machining and Finishing. There are also three support departments: Human Resources (HR), Maintenance and Design. The budgeted overhead costs for the year for each department are as follows:

Human Resources K250,000

Maintenance 230,000

Design 350,000

Machining 800,000

Finishing 400,000

The budgeted machine hours for the Machining Department are 30,000, and the budgeted direct labour hours for the Finishing Department are 10,000. These activities are used to allocate manufacturing overhead costs to products in the two departments.

The usage of the support departments' output for the year is as follows:

Required:

1. Use the direct method to allocate support department costs to production departments, and determine the predetermined manufacturing overhead rates for the two production departments.

2. Use the step-down method to allocate support costs to production departments, and determine the predetermined manufacturing overhead rates for the two production departments.

3. Estimate the overhead cost of 'Gauge 100', which is produced using 300 machine hours in the Machining Department and 500 labour hours in the Finishing Department under both 1.) and 2.) above.

Transcribed Image Text:

User of the service Human Resource Maintenance Design Machining Finishing Total Provider of Service Output (hours of service) Human Resource Maintenance Design 500 500 4,000 5,000 10,000 500 3,500 4,000 8,000 4,500 1,500 6,000 User of the service Human Resource Maintenance Design Machining Finishing Total Provider of Service Output (hours of service) Human Resource Maintenance Design 500 500 4,000 5,000 10,000 500 3,500 4,000 8,000 4,500 1,500 6,000

Answer rating: 100% (QA)

1 Direct method In this method cost of service department will be distributed to only production dep... View the full answer