The following information pertains to Amon Schrock Corporation: $$\begin{array} { | l | r | r | r | r | }
\hline & { \text { Support Departments } } & & { \text { Producing Departments } } \
\hline & \text { Personnel } & \text { Maintenance } & \text { Fabrication } & \text { Assembly } \
\hline \text { Budgeted overhead } & \$ 80,000 & \$ 144,000 & \$ 280,000 & \$ 320,000 \
\hline \text { Direct labor hours } & 4,000 & 5,000 & 16,000 & 20,000 \
\hline \text { Machine hours } & - & - & 24,000 & 16,000 \
\hline \text { Number of employees } & 16 & 20 & 60 & 100 \
\hline
\end{array}$$ Amon Schrock Corporation does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours.
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) is

Question

The following information pertains to Amon Schrock Corporation: $$\begin{array} { | l | r | r | r | r | } 
\hline & { \text { Support Departments } } & & { \text { Producing Departments } } \
\hline & \text { Personnel } & \text { Maintenance } & \text { Fabrication } & \text { Assembly } \
\hline \text { Budgeted overhead } & \$ 80,000 & \$ 144,000 & \$ 280,000 & \$ 320,000 \
\hline \text { Direct labor hours } & 4,000 & 5,000 & 16,000 & 20,000 \
\hline \text { Machine hours } & - & - & 24,000 & 16,000 \
\hline \text { Number of employees } & 16 & 20 & 60 & 100 \
\hline
\end{array}$$ Amon Schrock Corporation does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labor hours.
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) is

Quizplus · Accepted Answer

The direct method allocates support department costs directly to the producing departments without any allocation between support departments. First, allocate the Personnel and Maintenance costs based on the given bases:- Personnel costs (\$80,000) are allocated based on the number of employees. Fabrication has 60 employees, and Assembly has 100 employees, out of a total of 160 employees. So, Fabrication gets $\frac{60}{160} \times \$80,000 = \$30,000$, and Assembly gets $\frac{100}{160} \times \$80,000 = \$50,000$.- Maintenance costs (\$144,000) are allocated based on machine hours. Fabrication has 24,000 machine hours, and Assembly has 16,000 machine hours, out of a total of 40,000 machine hours. So, Fabrication gets $\frac{24,000}{40,000} \times \$144,000 = \$86,400$, and Assembly gets $\frac{16,000}{40,000} \times \$144,000 = \$57,600$.Adding these allocated costs to the original overhead costs for Fabrication:- Original overhead: \$280,000- Personnel allocated: \$30,000- Maintenance allocated: \$86,400- Total overhead for Fabrication: \$280,000 + \$30,000 + \$86,400 = \$396,400The predetermined overhead rate for Fabrication is calculated based on direct labor hours (16,000 hours):$$ \text{Predetermined overhead rate} = \frac{\text{Total overhead for Fabrication}}{\text{Direct labor hours}} = \frac{\$396,400}{16,000} = \$24.775 $$Rounded to two decimal places, the rate is \$24.78.

The Following Information Pertains to Amon Schrock Corporation Amon Schrock Corporation Does Not Divide Costs into Fixed and |