Ely Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $60,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $9,000 are allocated on the basis of number of employees. The direct costs of Departments X and Y are $18,000 and $30,000, respectively. Data on standard service hours and number of employees are as follows: $\begin{array}{lcccc}
&\text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept. } \
&\text { Dest. } & \text { Dept. } & \underline{X} & \underline{Y}\
\text { Standard service hours used } &100&50&300&150 \
\text { Number of employees } &5&10&45&45\
\text { Direct labor hours } &50&50&250&250
\end{array}$
Predetermined overhead rates for Departments X and Y, respectively, are based on direct labor hours.
What is the overhead rate for Department Y assuming the direct method is used?

Question

Quizplus · Accepted Answer

The overhead rate for Department Y is calculated by first allocating the support department costs to the producing departments based on the given criteria (standard service hours for Maintenance and number of employees for Personnel), then dividing the total costs allocated to Department Y by its direct labor hours.1. Allocate Maintenance Department costs ($60,000) based on standard service hours:- Total service hours = 100 (Maint.) + 50 (Person.) + 300 (X) + 150 (Y) = 600 hours.- Department Y uses 150 hours, so the allocation for Y = ($60,000 / 600 hours) * 150 hours = $15,000.2. Allocate Personnel Department costs ($9,000) based on the number of employees:- Total employees = 5 (Maint.) + 10 (Person.) + 45 (X) + 45 (Y) = 105 employees.- Department Y has 45 employees, so the allocation for Y = ($9,000 / 105 employees) * 45 employees = $3,857.14 (rounded to the nearest cent).3. Total allocated overhead costs for Department Y = $15,000 (Maintenance) + $3,857.14 (Personnel) = $18,857.14.4. Add direct costs of Department Y = $18,857.14 (allocated overhead) + $30,000 (direct costs) = $48,857.14.5. Overhead rate for Department Y = Total costs / Direct labor hours = $48,857.14 / 250 hours = $195.43.However, since none of the provided options match the calculated value, and the correct procedure involves allocating overhead based on direct labor hours, there seems to be a misunderstanding in the calculation or the interpretation of the options. Given the options, the closest approach would involve a different calculation or assumption not provided in the question. Therefore, without additional information or clarification, the correct answer based on standard calculation procedures cannot be matched to the provided options.

Ely Company Has Two Support Departments, Maintenance Department and Personnel