Question

HI, I just have a simple or dum question. I am currently takingmanagerial accounting and we are learning the direct and stright-method of predetermined overhead rates. I found an example onlinebut for the DIRECT METHHOD I am not able to figureout where theratios are coming from and what they mean. I would greatlyappreciate the help. Thank You - Maria R.

I just need help with the Direct method question. I need to knowhow to get ratios.

1.

value:
50.00 points

Problem 4B-6 Step-Down Method versus Direct Method;Predetermined Overhead Rates [LO4-10, LO4-11]

The Sendai Co., Ltd., of Japan has budgeted costs in its variousdepartments as follows for the coming year:

FactoryAdministration	$	480,760
CustodialServices		116,260
Personnel		45,602
Maintenance		141,258
Machining—overhead		874,528
Assembly—overhead		1,181,192
Total cost	$	2,839,600

The companyallocates service department costs to other departments in theorder listed below.

Department	Numberof Employees	Total Labor- Hours	Square Feet of Space Occupied	Direct Labor- Hours	Machine- Hours
FactoryAdministration	27	—	8,600	—	—
CustodialServices	11	11,600	3,600	—	—
Personnel	18	16,700	8,600	—	—
Maintenance	54	44,500	16,000	—	—
Machining	64	60,000	60,000	112,000	180,000
Assembly	96	150,000	20,000	227,000	36,000
	270	282,800	116,800	339,000	216,000

Machining and Assembly are operating departments; the otherdepartments are service departments. Factory Administration isallocated on the basis of labor-hours; Custodial Services on thebasis of square feet occupied; Personnel on the basis of number ofemployees; and Maintenance on the basis of machine-hours.

Required:

1.

Allocate service department costs to consuming departments bythe step-down method. Then compute predetermined overhead rates inthe operating departments using a machine-hours basis in Machiningand a direct labor-hours basis in Assembly. (Please enterallocations from a department as negative and allocations to adepartment as positive. The line should add across to zero. Do notround intermediate calculations. Round "Predetermined overheadrates" to 2 decimal places and other answers to the nearest wholedollar amount.)

2.

Allocate service department costs to consuming departments bythe direct method. Again, compute predetermined overhead rates inMachining and Assembly. (Please enter allocations from adepartment as negative and allocations to a department as positive.The line should add across to zero. Do not round intermediatecalculations. Round "Predetermined overhead rates" to 2 decimalplaces and other answers to the nearest whole dollaramount.)

3.	Assume that the company doesn’t bother with allocating servicedepartment costs but simply computes a single plantwide overheadrate based on total overhead costs (both service department andoperating department costs) divided by total direct labor-hours.Compute the plantwide overhead rate. (Round your answer to2 decimal places.)

4.	Suppose a job requires machineand labor time as follows:

	Machine-Hours	Direct Labor-Hours
MachiningDepartment	290	28
AssemblyDepartment	15	84
Total hours	305	112

Compute the amount of overhead cost that would be assigned tothe job if the overhead rates were developed using the stepdownmethod, the direct method, and the plantwide method. (Roundintermediate calculations to 2 decimal places and finalcalculations to the nearest whole dollar.)