Charlie Company manufactures a high SPF sunscreen lotion using two producing departments: mixing and bottling. Three service departments support the production departments: maintenance, building and grounds, and cafeteria. Budget data for overhead for the five departments are shown below. Cost drivers are as follows: Maintenance/Machine hours; Building & Grounds/Square feet; Cafeteria/Number of employees.
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Service Departments
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Producing Departments
|
|
Maintenance
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Building & Grounds
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Cafeteria
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Mixing
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Bottling
|
|
Overhead Costs
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$30,000
|
$70,000
|
$50,000
|
$20,000
|
$30,000
|
|
Number of employees
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10
|
2
|
3
|
15
|
25
|
|
Square feet
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1,000
|
|
3,000
|
3,000
|
9,000
|
|
Machine hours
|
|
|
|
4,000
|
1,000
|
- Allocate the overhead costs to the producing departments using the direct method and then compute the total overhead cost for each producing department.
- Using the information developed in 1. (above), compute departmental overhead rates for the mixing and bottling departments based on machine hours used by the mixing and bottling departments.