Operating Divisions: Energy Cell and Jetski

Exploding Energy Cells

Direct Labour Hours 25,000

Overhead costs $290,000

Machine Hours 7,500

Number of Employees 25

Joltin' Jetski Engines

Direct Labour Hours 115,000

Overhead costs $127,500

Machine Hours 4,500

Number of Employees 75

Departments :

Electric and People Resource Center (PRC) Support

Electric

Direct Labour Hours --

Overhead costs $150,000

Machine Hours 2,500

Number of Employees 35

PRC

Direct Labour Hours --

Overhead costs $365,000

Machine Hours 2,500

Number of Employees 45

SOLVE and ANALYZE:

1a. Calculate the allocation ratios for electric and PRC and allocate the support service costs to the producing departments. (Calculate using 3 decimal places)

1b. BamBam isn't so sure of the number and asks you instead to assume departmental overhead rates are based on direct labour hours. He wants you to calculated the overhead rate for the energy cell division and for the Jetski division. (overheads rate should be rounded to nearest cent).

2. Based on the numbers and the simmering conflict between partners BamBam and Johnny-O, what management accounting advice and allocation would you recommend for "Concussion Ave" company to going forward and avoid losing money?