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

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

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:
overhead costs
Number of
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
c. Find the cost of each job using department rates with step service department cost
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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Top Answer

Hi please find the... View the full answer


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
5,200 Total
2,200 2,400...

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