SPSHT3_06 - COST AND MANAGEMENT ACCOUNTING 2 ASSIGNMENT#3...

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COST AND MANAGEMENT ACCOUNTING 2 ASSIGNMENT #3 - ALLOCATION METHODS FOR SERVICE DEPT. COSTS AND RELATED OVERHEAD RATES The controller of Ashley Company has recommended that the company move from a single plant- wide overhead rate to multiple departmental overhead rates, one for each of the producing departments, Stamping and Assembly. However, she is not sure whether to allocate service department costs using the step or direct methods. Therefore, she wishes to use both methods on an experimental basis for the new few years to determine the effects of the dollar cost of the jobs the company bids on. Stamping is machine-intensive and Assembly is labour-intensive. Below is the budgeted data for the year ended December 31, 2005 relating to service department costs and allocation parameters. Factory Department Service Dept. Cost # of Employees Total Labour Has. Sq. ft. of Space Occupied Direct Labour Hours Machine Hours Factory admin. $540,000 22 - 5,000 - - Custodial serv. 137,520 8 6,000 2,000 - - Personnel 57,680 10 10,000 3,000 - - Mach. Maint. 90,400 50 44,000 10,000 - -
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