Direct Method

Eilers Company has two producing departments and two support departments. The following budgeted data pertain to these four departments:

Support DepartmentsProducing DepartmentsGeneral FactoryReceivingAssemblyFinishingDirect overhead$440,000$170,000$40,000$72,000Square footage2,6005,2005,200Number of receiving orders3301,7001,450Direct labor hours28,00050,000

The company has decided to simplify its method of allocating support service costs by switching to the direct method.

Required:

1.Allocate the costs of the support departments to the producing departments using the direct method. Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar. Use the rounded values for subsequent calculations.

Allocation ratios:

AssemblyFinishingSquare footageNumber of receiving ordersAllocations:AssemblyFinishingGeneral Factory$$ReceivingDirect costsTotal$$

2.Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)

Overhead RateAssemblyper direct labor hourFinishingper direct labor hour