Eastern Springs Company uses two producing departments (A and B) and two service departments (S1 and S2). The costs incurred in S1 and S2 are allocated to Departments A and B and included in their factory overhead rates for costing products. S1 costs are allocated based on the number of employees, S2 costs are allocated based on direct labor-hours, and the production departmental overhead rates are also based on direct labor hours.
The following data are available for a recent period:
Required:
a. Prepare a schedule allocating the service department costs to the producing departments using the step allocation method. The department providing the greatest percentage of interdepartmental services to other service departments should be allocated first.
b. Determine the overhead rates per direct labor hour for Departments A and B.

Question

Eastern Springs Company uses two producing departments (A and B) and two service departments (S1 and S2). The costs incurred in S1 and S2 are allocated to Departments A and B and included in their factory overhead rates for costing products. S1 costs are allocated based on the number of employees, S2 costs are allocated based on direct labor-hours, and the production departmental overhead rates are also based on direct labor hours.
The following data are available for a recent period:
 Required:
a. Prepare a schedule allocating the service department costs to the producing departments using the step allocation method. The department providing the greatest percentage of interdepartmental services to other service departments should be allocated first.
b. Determine the overhead rates per direct labor hour for Departments A and B.

Quizplus · Accepted Answer

The Answer of Eastern Springs Company uses two producing departments (A and B) and two service departments (S1 and S2). The costs incurred in S1 and S2 are allocated to Departments A and B and included in their factory overhead rates for costing products. S1 costs are allocated based on the number of employees, S2 costs are allocated based on direct labor-hours, and the production departmental overhead rates are also based on direct labor hours.
The following data are available for a recent period:
 Required:
a. Prepare a schedule allocating the service department costs to the producing departments using the step allocation method. The department providing the greatest percentage of interdepartmental services to other service departments should be allocated first.
b. Determine the overhead rates per direct labor hour for Departments A and B.

Eastern Springs Company Uses Two Producing Departments (A and B)