View the step-by-step solution to: 19.32 Assume that the Pennington Group, a manufacturer of fine

Please help with allocating service depa...
This question was answered on Sep 24, 2013. View the Answer
Please help with allocating service department costs. Please see attached. Thanks!
19.32.docx

19.32
Assume that the Pennington Group, a manufacturer of fine casual outdoor furniture, allocates
Human Resources Department costs to the producing departments (cutting and welding) based
on the number of employees; Facilities Department costs are allocated based on the amount of
square footage occupied. Direct department costs, labor hours, and square footage data for the
four departments for October are as follows:
Direct
department
overhead costs
Number of
employees
Number of direct
labor hours
Amount of
square footage

Human resources
60,000

facilities
150,000

cutting
800,000

welding
370,000

5

5

40

60

-

-

8,000

10,000

10,000

3,000

100,000

50,000

Assume that two jobs, A1 and A2 were completed during October and that each job had direct
materials costs of $1,200. Job A1 used 80 direct labor hours in the Cutting Department and 20
direct labor hours in the Welding Department. The direct labor rate is $50 in both departments.
a. Find the cost of each job using a plantwide rate based on direct labor hours.
b. Find the cost of each job using department rates with direct service department cost
allocation.
c. Find the cost of each job using department rates with step service department cost
allocation.
d. Explain the differences in the costs computed in requirements (a)-(c) for each job. Which
costing method is better for product pricing and profitability analysis?

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Hi please find the attached solution. Regards, Mmahajan View the full answer

8486195.xlsx

a.

Find the cost of each job using a plant wide rate based on direct labor hours.

Particulars

A1

A2

Direct Material
Add Direct Labour
Total Cost

b.

1,200
4000
5,200

Total
1,200
1000
2,200...

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