Oh rate in p2 budgeted oh in p2 budgeted dlhs unit

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Budgeted OH in P2 / Budgeted DLHs = = Unit product B cost = DL + DM +MOH (MOH= MOHP1 +MOHP2) = = = 2 Q2. The Smith Company has 4 departments in is factory: Three service departments S1, S2 and S3; Two production departments P1 and P2 (each produce single product). The budgeted costs of these departments are: S1: \$40,000 S2: \$20,000 S3: \$20,000 P1: \$80,000 P2: \$40,000 The consumption of services is given in the following table: Service provided by Service provide to S1 S2 S2 S3 P2 45% 20% 10% 30% 10% P1 35% S1 S3 35% 50% 35% 30% Allocate service department costs to the production departments using the: i) Direct method ii) Step-down method iii) Reciprocal method Solutions: i) Direct method S1 S2 S3 P1 P2 Initial distribution 40,000 20,000 20,000 80,000 40,000 Reallocate S1 Reallocate S2 Reallocate S3 3 ii) Step down method Order of allocation: Rule 1: firstly allocate the support department which provides services to the highest number of other support departments. Rule 2: If they are equal, allocate the support department with the highest overhead costs first. Rule 3: Once a support departmentâ€™s costs have been allocated you do not allocate costs back to that department. Initial distribution S1 40,000 S2 20,000 S3 20,000 P1 80,000 P2 40,000 Reallocate Reallocate Reallocate iii) Reciprocal method Equation 1: S1= Equation 2: S2= Equation 3: S3= S1 S2 S3 P1 P2 Initial distribution 40,000 20,000 20,000 80,000 40,000 Reallocate S1 Reallocate S2 Reallocate S3 4...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online