Stevenson Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and general factory costs to each operating division using the direct method. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. Support department cost allocations using the direct method are based on the following data:

Required:
1. Calculate the allocation ratios for Power and General Factory.
2. Allocate the support service costs to the operating divisions.
3. Assume divisional overhead rates are based on direct labor hours. Calculate the overhead rate for the Battery Division and for the Small Motors Division.
 

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Support Departments Operating Divisions General Small Power Factory Battery Motors Overhead costs $160,000 2,000 S430,000 $163,000 $84.600 Machine hours 2,000 7,000 1,000 15,000 Square footage Direct labor hours 1,000 1,500 5,000 18,000 60,000 Support Departments Operating Divisions General Small Power Factory Battery Motors Overhead costs $160,000 2,000 S430,000 $163,000 $84.600 Machine hours 2,000 7,000 1,000 15,000 Square footage Direct labor hours 1,000 1,500 5,000 18,000 60,000

Answer rating: 100% (QA)

1 Power 8500 1500 10000 machine hours General factory 10000 20000 30000 sq f... View the full answer