Accountancy
Anders Company has two producing departments - Cutting and Sewing - and two support departments - Maintenance and General Factory (GF). Anders provided the following information on the four departments:
Maintenance | General Factory | Cutting | Sewing | |
Direct overhead costs | $10,000 | $270,000 | $56,400 | $75,000 |
Machine hours | 459 | 2,000 | 9,000 | 9,000 |
Square footage | 2,500 | 3,418 | 5,000 | 8,500 |
The company does not break overhead into fixed and variable components. The bases for allocation are maintenance - machine hours; general factory - square feet.
1. Calculate the allocation ratios for the four departments using the sequential (step) method. The support departments are ranked in order of highest cost to lowest cost. Take allocation ratios out to four significant digits.
Maintenance | General Factory | Cutting | Sewing | |
Machine hours | ||||
Square footage |
2. Allocate the overhead costs to the producing departments using the sequential (step) method. Round allocated costs to the nearest dollar.
Maintenance | General Factory | Cutting | Sewing | |
Direct overhead costs | $10,000 | $270,000 | $56,400 | $75,000 |
Machine hours | ||||
Square footage | ||||
Total |
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