The Sendai Co., Ltd. of Japan has budgeted costs in its various departments as follows for the coming year:
The Japanese currency is the yen, denoted by. The company allocates service department costs to other departments in the order listed below.
Machining and Assembly are operating departments; the other departments are service departments. Factory Administration is allocated on the basis of labor-hours: Custodial Services on the basis of square feet occupied; Personnel on the basis of number of employees; and Maintenance on the basis of machine-hours.
Required:
1. Allocate service department costs to consuming departments by the step-down method. Then compute predetermined overhead rates in the operating departments using a machine-hours basis in Machining and a direct labor-hours basis in Assembly.
2. Repeat (1) above, this time using the direct method. Again compute predetermined overhead rates in Machining and Assembly.
3. Assume that the company doesn’t bother with allocating service department costs service department and operating department costs) divided by total direct labor-hours. Compute the plant- wide overhead rate.
4. Suppose a job requires machine and labor time as follows:
Using the overhead rates computed in (1), (2), and (3) above, compute the amount of overhead cost that would be assigned to the job if the overhead rates were developed using the step- down method, the direct method, and the plantwidemethod.