E7-25 (10pt)
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[The following information applies to the questions displayed below.]
Great Ape Glassworks manufactures glass used for the screens on smartphones. It has two producing departments, P1
and P2, and only one service department, S1. The company is able to track overhead to the various departments but
wants to allocate the service department costs to the producing departments. However, the company is not sure which of
the multiple allocation bases should be selected. The data it collected appear in the table below.
Department
P1
P2
S1
Overhead Assigned
$ 159,000
$ 263,500
$ 80,000
Potential allocation base
Employee headcount
Space used (in square feet)
Productive capacity (in units)
3-year average percentage of $1 output used
P1
P2
60
20
4,900
9,100
58,950
72,050
60%
40%
References
Required:
1. Determine the total estimated overhead cost for each of the producing departments after allocating the cost of the service
department:
a. Using employee headcount as the allocation base
b. Using occupied space as the allocation base
c. Using productive capacity as the allocation base
d. Using the 3-year average use as the allocation base
Department P1
Department P2
Total
$
0
$
0
$
0
$
0
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