The directors of Cliff-Hang Inc. has been critical of the product costing methods whereby factory overhead is

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Question:

The directors of Cliff-Hang Inc. has been critical of the product costing methods whereby factory overhead is charged to products on a factory-wide overhead rate. The chief accountant suggested a departmentalization of the factory for the purpose of calculating departmental factory overhead rates, accumulating the following estimated direct departmental overhead rate on an annual basis :

PRODUCING DEPARTMENTS: TOTAL COSTS ($)

Department No. 08 35,622

Department No. 09 44,949

Department No. 10 47,575

SERVICE DEPARTMENTS :

Store-room 15,933

Repairs & Maintenance 21,351

General Factory Cost 66,270

Other than above mentioned departmental overheads, the annual light and power bill is estimated at $9,300 and is allocated on the basis of electricity usage.

The following departmental information is provided:

Repair & Direct

Electricity Area No. of Maintenance Labor

Usage Occupied Requisitions Hours Hours

Sq. ft.

Dept 08 20% 21,000 124,200 4,800 80,000

Dept 09 25% 25,200 81,000 4,200 90,000

Dept 10 30% 29,400 40,500 6,000 80,000

Store-room 3% 03,360 - - -

Repair & Maint. 12% 05,040 24,300 - -

Gen. Factory Cost 10% - - - -

The order and bases of distribution of service department expenses are as follows:

General factory cost - area occupied
Store-room expenses - estimated requisitions
Repairs & maintenance - estimated repairs and maintenance hours

Required :

You are required to prepare a factory overhead distribution sheet with calculation of overhead rates for the producing departments based on direct labor hours.