A company is composed of five cost centers. Each month a budget is prepared anticipating the distribution of overhead costs to the centers. Let Cw be costs incurred within the cost center, such as depreciation, supplies and indirect labor, and let Cm be misc costs. The table shows the initial distribution of all overhead costs to each cost center. Additionally, for each center and month, a schedule of direct labor dollars and hours is matched.
(Hint: Each direct department such as fabrication, assembly, and testing will have indirect labor costs that are organized for the purpose of the department and are included in Cw. Dimensions for the overhead rate in dollard of overhead cost to direct labor hours.)
Make a distribution of engineering and administration costs to the producing departments based on the proportion of direct labor dollars. Find the total overhead costs for the producing departments. Find the overhead rate for the producing departments based on hours.
Cost Center Cw Cm Direct labor, $ Direct Labor, Hours
Fabrication 300,000 10,000 201,600 16,000
Assembly 80,000 5,000 72,960 6,400
Testing 20,000 40,000 37,440 3,200
Engineering 40,000 90,000
Administration 20,000 10,000
(Please show how the calculations are arrived for cost allocated for each department; Fabrication, Assembly, and Testing)