Indirect Cost Allocation: Direct Method
Sprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded:
| Melting Department direct overhead |
$140,000 |
| Molding Department direct overhead |
300,000 |
| General plant management |
100,000 |
| Plant security |
25,000 |
Other pertinent data follow:
| Number of employees |
40 |
50 |
| Space occupied (square feet) |
10,000 |
40,000 |
| Machine hours |
10,000 |
2,000 |
| Direct labor hours |
4,000 |
20,000
|
(a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments.
(b) Determine the total departmental overhead costs for the Melting and Molding Departments.
(c) Assuming the Melting Department uses machine hours and the Molding Department uses direct labor hours to apply overhead to production, calculate the overhead rate for each production department. (Round your answers to two decimal places.)