Dean Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $13,500 are allocated on the basis of number of employees. The direct costs of departments X and Y are $27,000 and $45,000, respectively.
Data on standard service hours and number of employees are as follows:
$\begin{array}{lrrrr}
&\text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept } \
& \underline{\text { Dept. }} & \underline{\text { Dept. }} & \underline{\mathrm{X}} & \underline{\mathrm{Y}}\
\text { Standard service hours used } & 200 & 150 & 1,200 & 600 \
\text { Number of employees } & 25 & 50 & 75 & 75 \
\text { Direct labour hours } & 250 & 250 & 1.000 & 500
\end{array}$
Predetermined overhead rates for departments X and Y,respectively,are based on direct labour hours.
-Refer to the figure.What is the overhead rate for Department X assuming the direct method is used?

Question

Dean Manufacturing Company has two support departments, Maintenance Department and Personnel Department, and two producing departments, X and Y. The Maintenance Department costs of $90,000 are allocated on the basis of standard service hours used. The Personnel Department costs of $13,500 are allocated on the basis of number of employees. The direct costs of departments X and Y are $27,000 and $45,000, respectively.
Data on standard service hours and number of employees are as follows:
 $\begin{array}{lrrrr}
&\text { Maint. } & \text { Person. } & \text { Dept. } & \text { Dept } \
& \underline{\text { Dept. }} &  \underline{\text { Dept. }} & \underline{\mathrm{X}} & \underline{\mathrm{Y}}\
\text { Standard service hours used } & 200 & 150 & 1,200 & 600 \
\text { Number of employees } & 25 & 50 & 75 & 75 \
\text { Direct labour hours } & 250 & 250 & 1.000 & 500
\end{array}$
 Predetermined overhead rates for departments X and Y,respectively,are based on direct labour hours.
-Refer to the figure.What is the overhead rate for Department X assuming the direct method is used?

Quizplus · Accepted Answer

The overhead rate for Department X is calculated by first allocating the support department costs to the producing departments using the direct method. Maintenance costs are allocated based on standard service hours, and Personnel costs are allocated based on the number of employees. After allocation, the total overhead for Department X is divided by its direct labor hours to find the overhead rate.

Dean Manufacturing Company Has Two Support Departments, Maintenance Department and Personnel