Direct Method Eilers Company has two producing departments and two support departments. The following budgeted...
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Accounting
Direct Method
Eilers Company has two producing departments and two support departments. The following budgeted data pertain to these four departments:
Support Departments
Producing Departments
General Factory
Receiving
Assembly
Finishing
Direct overhead
$430,000
$180,000
$46,000
$77,000
Square footage
2,000
4,000
4,000
Number of receiving orders
310
1,700
1,500
Direct labor hours
25,000
46,000
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:
Assembly
Finishing
Square footage
Number of receiving orders
Allocations:
Assembly
Finishing
General Factory
$
$
Receiving
Direct costs
Total
$
$
2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)
Overhead Rate
Assembly
per direct labor hour
Finishing
per direct labor hour
Answer & Explanation
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