The following information pertains to Utter Company:

Utter Company 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.
What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)

Question

The following information pertains to Utter Company:

Utter Company 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.
What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to dollars.)

Quizplus · Accepted Answer

The direct method allocates maintenance costs based on actual hours worked in each department. The Assembly Department incurred 1,200 direct labor hours, which is 40% of the total direct labor hours worked in both departments. Therefore, the Assembly Department is allocated 40% of the total maintenance costs, which is $28,800.

The Following Information Pertains to Utter Company