Calculating Departmental Overhead Rates Using Post-Allocation Costs
Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.
Support
Depertmants
Producing
Departments
Human
General
Resources Factory
Fabricating Assembly
Direct costs
$150,000 $380,000
$114,200 $93,000
Normal activity:
Number of
employees
Square footage
2,000
80
87.5
162.5
15,000
5,000
The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the
basis of square footage. Valron Company uses the direct method of support department cost allocation. Solve for the allocated costs to Fabricating and
Assembly using the direct method of support department cost allocation. The Fabricating Department overhead rate is based on normal activity of
88,000 machine hours. The Assembly Department overhead rate is based on normal activity of 150,000 direct labor hours.
Job 316 required eight machine hours in Fabricating and four direct labor hours in Assembly. Total direct materials cost $120, and total direct labor
cost was $80.
Required:
1. Calculate the overhead rate for Fabricating based on machine hours and the overhead rate for Assembly based on direct labor hours. If required,
round your answers to the nearest cent. Use the rounded values for subsequent calculations.
Overhead Rate
Fabricating department
Assembly department
2.92 \times per mach, hr.
3.01 \times per DLH
2. Using the overhead rates calculated in Requirement 1, calculate the cost of Job 316. If required, round your answer to the nearest cent
229.56 \times
