Porter has two producing departments (Fabricating and Assembly) and three support departments (Maintenance, Human Resources (HR) and General Factory (GF)). Porter provided the following information on the five departments:

		Maintenance			HR			GF			Fabricating			Assembly
Direct overhead cost		$80,000			$120,000			$260,000			$93,400			$56,700
Machine hours		1,000			3,000			5,000			12,000			3,000
Direct labor hours		4,000			5,000			8,000			10,000			30,000
Square footage		500			2,500			10,000			12,000			18,000

Porter uses the sequential method of support department cost allocation, and support departments are ranked in order of direct overhead cost (from high to low). Maintenance is allocated based on machine hours, HR on direct labor hours, and GF on the basis of square footage. The Fabricating overhead rate is based on machine hours and the Assembly overhead rate is based on direct labor hours.

Calculate the allocation ratios to five significant digits and fill them into the following table:

Maintenance

HR

GF

Fabricating

Assembly

General Factory

Human Resources

Maintenance

Using the allocation ratios, fill in the following table to allocate support department costs to the producing departments.

Maintenance

HR

GF

Fabricating

Assembly

Direct overhead cost

$80,000

$120,000

$260,000

$93,400

$56,700

Allocate:

Maintenance

Human Resources

General Factory

Total after allocation

Notice that after allocation, zero dollars remain in the support departments and all overhead cost has been allocated to the producing departments. As a check on your work, add all direct overhead costs from the first line - it equals $610,100. Then add the totals after allocation - again, it equals $610,100.

Finally, calculate the overhead rates (rounded to the nearest cent) for Fabricating and Assembly.

Answer rating: 100% (QA)

The support departments are ranked in the following order Rank 1 GF Rank 2 HR Rank 3 Maintenance All... View the full answer