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Cost AccountingTRANSCRIPT
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FOHCost AccountingDMPalatino
Departmental Overhead RatesA two-stage process isnecessary because differentdepartments may have different cost drivers.
Finishing DepartmentShipping DepartmentPainting DepartmentDepartmental Overhead RatesCost poolsStage One:Costs assignedto poolsIndirectLaborIndirectMaterialsOtherOverheadDepartment1Department2Department3Departmental Overhead RatesCost poolsStage One:Costs assignedto poolsIndirectMaterialsOtherOverheadIndirectLaborDepartment1Department2Department3Departmental Overhead RatesCost poolsStage One:Costs assignedto poolsIndirectMaterialsOtherOverheadIndirectLaborDepartment1Department2Department3Departmental Overhead RatesDepartment1Department2Department3 Products Cost poolsDirect Labor HoursMachineHoursRawMaterialsCostStage One:Costs assignedto poolsStage Two:Costs appliedto productsDepartmental Allocation BasesIndirectMaterialsOtherOverheadIndirectLaborActivity-Based Costing
In the ABC method, we recognize that many activities within a department drive overhead costs.Assigning Costs to Activity Centers Assign costs to the activity centers where they are accumulated while waiting to be applied to products.
Selecting Cost Drivers Assign costs from the activity center to the product using appropriate cost drivers.
When selecting a cost driver consider:The ease of obtaining data.The degree to which the cost driver measures actual consumption by products.
ProductionDepartmentsServiceDepartmentsCarry out the central purposesof an organization.
Provide supportthat facilitates theactivities of production departments.
Service Department Cost AllocationFirst, we identify the factor that drives costs in theservice department.This cost driver is called the allocation base.How are servicedepartment costscharged to productiondepartments?
Service Department Cost Allocation
Second, we measure theconsumption of theallocation base in theproduction departments.Service Department Cost AllocationHow are servicedepartment costscharged to productiondepartments?
Third, we allocate the servicedepartment cost based on the relative amount of theallocation base consumed ineach production department. Service Department Cost AllocationHow are servicedepartment costscharged to productiondepartments?
Allocated service departmentcosts become a part of themanufacturing overhead in each production department. Service Department Cost AllocationWhat happens toservice departmentcosts after they areallocated to production departments?
Allocated service departmentcosts become a part of themanufacturing overhead in each production department. I get it. They becomea part of the overheadthat is applied toproducts with apredeterminedoverhead rate.Service Department Cost Allocation
I get it. They becomea part of the overheadthat is applied toproducts with apredeterminedoverhead rate.Thats right. Take a look atthis flow chart.I think it will summarizeour discussion of theallocation process. Service Department Cost AllocationService Department(Cafeteria)Service Department(Accounting)Service Department(Personnel)ProductionDepartment(Machining)ProductionDepartment(Assembly)The ProductService Department Cost AllocationFirst Stage AllocationsService department costs are allocated to production departments.Service Department(Cafeteria)Service Department(Accounting)Service Department(Personnel)ProductionDepartment(Machining)ProductionDepartment(Assembly)The ProductSecond Stage AllocationsProduction department overhead costs, plus allocated service department costs, are applied to products usingdepartmental predetermined overhead rates.Service Department Cost AllocationSelecting Allocation BasesPersonnel:Number ofemployeesReceiving:UnitshandledSecurity:SquarefootagePower:KilowatthoursCafeteria:Number ofemployeesCustodial:SquarefootageAccounting:StaffhoursTypicalAllocationBasesSelecting Allocation BasesCriteria forselectionPersonnel:Number ofemployeesReceiving:UnitshandledSecurity:SquarefootagePower:KilowatthoursCafeteria:Number ofemployeesCustodial:SquarefootageAccounting:StaffhoursSimplicitySelecting Allocation BasesPersonnel:Number ofemployeesSecurity:SquarefootagePower:KilowatthoursCustodial:SquarefootageAccounting:StaffhoursAvailabilityof space orequipmentReceiving:UnitshandledCafeteria:Number ofemployeesCriteria forselectionSelecting Allocation BasesPersonnel:Number ofemployeesSecurity:SquarefootagePower:KilowatthoursCustodial:SquarefootageAccounting:StaffhoursBenefits receivedby the productiondepartment Receiving:UnitshandledCafeteria:Number ofemployeesCriteria forselectionInterdepartmental ServicesProblemAllocating costs when service departmentsprovide services to each otherSolutionsDirect MethodStep MethodDirect MethodService Department(Cafeteria)Service Department(Custodial)ProductionDepartment(Machining)ProductionDepartment(Assembly)Cost of servicesbetween servicedepartments areignored and allcosts areallocated directlyto productiondepartments.
Direct Method Example
Direct Method Example
$360,000 2020 + 30= $144,000Allocation base: Number of employees Direct Method Example
$360,000 3020 + 30= $216,000Allocation base: Number of employees
Direct Method Example$90,000 25,00025,000 + 50,000 = $30,000Allocation base: Square feet occupied
Direct Method Example$90,000 50,00025,000 + 50,000 = $60,000Allocation base: Square feet occupied Step MethodService Department(Cafeteria)Service Department(Custodial)ProductionDepartment(Machining)ProductionDepartment(Assembly)Service departmentcosts are allocatedto other servicedepartments andto productiondepartments, usuallystarting with theservice departmentthat serves thelargest number of other service departments. Step MethodService Department(Cafeteria)Service Department(Custodial)ProductionDepartment(Machining)ProductionDepartment(Assembly)Once a servicedepartments costsare allocated, other servicedepartments costsare not allocatedback to it. Step MethodService Department(Cafeteria)Service Department(Custodial)ProductionDepartment(Machining)ProductionDepartment(Assembly)Custodial willhave a newtotal to allocateto productiondepartments: itsown costs plusthose costsallocated fromthe cafeteria. Step Method Example
We will use the same data used in the direct method example.Step Method Example
$360,000 1010 + 20 + 30= $60,000Allocation base: Number of employees Step Method Example
$360,000 2010 + 20 + 30= $120,000Allocation base: Number of employees Step Method Example
$360,000 3010 + 20 + 30= $180,000Allocation base: Number of employees Step Method Example
New total = $90,000 original custodial cost plus $60,000 allocated from the cafeteria.Step Method Example
$150,000 25,00025,000 + 50,000 = $50,000Allocation base: Square feet occupied Step Method Example
$150,000 50,00025,000 + 50,000 = $100,000Allocation base: Square feet occupied Comparison of Methods
Algebraic MethodService Department(Cafeteria)Service Department(Custodial)ProductionDepartment(Machining)ProductionDepartment(Assembly)A servicedepartments costsare interallocated to other servicedepartments costs.Algebraic MethodService Department(Cafeteria)Service Department(Custodial)ProductionDepartment(Machining)ProductionDepartment(Assembly)Custodial & cafeteriawill have a newtotal to allocateto productiondepartments: itsown costs plusthose costsallocated from otherservice departmentsAlgebraic Method Example
We will use the same data used in the direct method example.Algebraic Method Example
$360,000 +1010 + 20 + 30= $60,000Allocation base: Number of employees 1010 + 20 + 30Algebraic Method Example
$360,000 1010 + 20 + 30= $60,000Allocation base: Number of employees Algebraic Method Example
$360,000 2010 + 20 + 30= $120,000Allocation base: Number of employees Algebraic Method Example
$360,000 3010 + 20 + 30= $180,000Allocation base: Number of employees Algebraic Method Example
New total = $90,000 original custodial cost plus $60,000 allocated from the cafeteria.Algebraic Method Example
$150,000 25,00025,000 + 50,000 = $50,000Allocation base: Square feet occupied Algebraic Method Example
$150,000 50,00025,000 + 50,000 = $100,000Allocation base: Square feet occupied Fixed Versus Variable Costs
Are fixedand variablecosts allocateddifferently?
ResultWhen one departmentdecreases activity toreduce allocations, alldepartments are penalizedbecause the chargeper use increases. Remember, total fixedcosts do not change asactivity changes.Fixed Versus Variable CostsProblemAllocating commonfixed costs using avariable activityallocation base
Fixed Versus Variable CostsProblemAllocating commonfixed costs using avariable activityallocation baseSolutionUse dual allocation method, allocatingfixed and variablecosts separately.
Dual Cost AllocationVariableCostsCharge toproductiondepartments at abudgeted rate timesactual short-run usage of the allocation base.FixedCostsAllocatebudgeted amountsto operating departmentsin proportion to thelong-run averageusage of theallocation base. Charge toproductiondepartments at abudgeted rate timesactual short-run usage of the allocation base.Allocatebudgeted amountsto operating departmentsin proportion to thelong-run averageusage of theallocation base. VariableCostsFixedCostsBudgeted costs should be allocatedto avoid passing on inefficienciesfrom the service departments.Dual Cost AllocationSimCo has a maintenance department and two productiondepartments: cutting and assembly. Variable maintenancecosts are budgeted at $0.60 per machine hour. Fixedmaintenance costs are budgeted at $200,000 per year.Data relating to the current year are: Allocate maintenance costs to the two operating departments.
Dual Cost AllocationExample
Variable costs are allocated based on hours used.Dual Cost AllocationExample
Variable costs are allocated based on hours used.Fixed costs are allocated based long-run average usage.Dual Cost AllocationExampleA Behavioral ProblemProblemDepartment managers may underestimatelong-run average usage to reduce fixed cost allocations.SolutionReward managers formaking accurate estimatesof long-run averageservice department needs.
The New Manufacturing EnvironmentMore accurate cost tracing systemsreduce the need for allocationof indirect costs.
The Rise of Activity-Based CostingService Department(Cafeteria)Service Department(Accounting)Service Department(Personnel)The ProductFirst stage allocations are toactivities, not departments.ActivityOneActivityTwoDepartmentalized Factory Overhead
Departmentalized Factory Overhead (contd)
Departmentalized Factory Overhead (contd)
Departmentalized Factory Overhead (contd)
Departmentalized Factory Overhead (contd)Departmentalized Factory Overhead (contd)
Departmentalized Factory Overhead (contd)
Departmentalized Factory Overhead (contd)
Departmentalized Factory Overhead (contd)End of Chapter
Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Number of employees15.010.020.030.0Square feet occupied5000.02000.025000.050000.0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsOperating DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Number of employees10.06.020.030.0Square feet occupied5000.02000.025000.050000.0Service DepartmentAllocation BaseCafeteriaNumber of employeesCustodialSquare feet occupiedSheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Cafeteria allocation-360000.0144000.0?Custodial allocation???Total after allocation $ 0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Cafeteria allocation-360000.0144000.0216000.0Custodial allocation???Total after allocation $ 0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Cafeteria allocation-360000.0144000.0216000.0Custodial allocation-90000.030000.060000.0Total after allocation $ 0 $ 0574000.0976000.0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Number of employees15.010.020.030.0Square feet occupied5000.02000.025000.050000.0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsOperating DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Number of employees10.06.020.030.0Square feet occupied5000.02000.025000.050000.0Service DepartmentAllocation BaseCafeteriaNumber of employeesCustodialSquare feet occupiedSheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Cafeteria allocation-360000.060000.0120000.0180000.0Custodial allocation-150000.0??Total after allocation $ 0 $ 0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Cafeteria allocation-360000.060000.0120000.0180000.0Custodial allocation-150000.050000.0100000.0Total after allocation $ 0 $ 0570000.0980000.0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Number of employees15.010.020.030.0Square feet occupied5000.02000.025000.050000.0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsOperating DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Number of employees10.06.020.030.0Square feet occupied5000.02000.025000.050000.0Service DepartmentAllocation BaseCafeteriaNumber of employeesCustodialSquare feet occupiedSheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Cafeteria allocation-360000.060000.0120000.0180000.0Custodial allocation-150000.0??Total after allocation $ 0 $ 0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Service DepartmentsProduction DepartmentsCafeteriaCustodialMachiningAssemblyDepartmental costs before allocation360000.090000.0400000.0700000.0Cafeteria allocation-360000.060000.0120000.0180000.0Custodial allocation-150000.050000.0100000.0Total after allocation $ 0 $ 0570000.0980000.0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16Long-runMaintenanceActualProductionUsage as aHoursDepartments% of TotalUsedCutting0.680000.0Assembly0.440000.0Total1.0120000.0Sheet: Sheet1Sheet: Sheet2Sheet: Sheet3Sheet: Sheet4Sheet: Sheet5Sheet: Sheet6Sheet: Sheet7Sheet: Sheet8Sheet: Sheet9Sheet: Sheet10Sheet: Sheet11Sheet: Sheet12Sheet: Sheet13Sheet: Sheet14Sheet: Sheet15Sheet: Sheet16OperatingHours of CapacityDepartmentsRequiredUsedCutting90000.080000.0Assembly60000.040000.0Total hours150000.0120000.0CuttingAssemblyDepartmentDepartmentVariable cost allocation: $0.60 80,000 hours used48000.0 $0.60 40,000 hours used24000.0Fixed cost allocation 60% of $200,000120000.0 40% of $200,00080000.0Total allocated cost168000.0104000.0Sheet1Following is an illustration of a simpler form of a factory overhead distribution sheet which neither carries a fixed-variable cost classification nor attempts to classify overhead into direct and indirect departmental charges.DepartmentAreaMachineryKilowattDirect LaborMachineFactoryNumber (Sq. Ft.)ValueHoursHoursHoursPayrollof workersMachine 15,500P200,0003,00030,0009,032P47,00015Machine 24,500100,0001,00010,0004,40225,00010Assembly3,50050,0002,00020,00012,00010Painting2,50020,0001,00010,0005,0005MaterialService2,00010,0001,2004,0004Toolroom1,00015,0003,0003,0002FactoryOffice1,0005,0001,5004,0004Estimated factory overhead for the year and the allocation bases are as follows:
Factory rentP24,000Floor areaFactory insurance4,000Floor areaDepreciation-Factory Machinery8,000Machinery valueRepairs & maintenance6,400Machinery valueLight & power18,600kilowatt hoursIndirect materials4,000Direct ChargeIndirect labor25,000Factory payrollFactory office expense3,000Direct ChargeSuperintendence1,000no. of employeesMiscellaneous factory overhead7,000Direct labor hoursThe service department costs are to be distributed in the following order:
1. Factory office-1/5 equally to the remaining sercvice departments and remaining 4/5 equally to the production departments.2. Toolroom-equally to the remaining departments3. Material service-based on the number of workers
The departmental overhead rates are to be computed as follows:
Machine 1 and Machine 2 - Machine hours basisAssembly and Painting - Direct labor hour basisAt the close of the current year the cost records yielded the following information:
Direct Labor HoursFactory PayrollMachine Hours
Machine 134,000P50,00010,100Machine 211,00032,0005,200Assembly23,00015,000Painting12,0008,000Material0.0Service6,000Toolroom4,000Factory0.0Office5,000
TALRUS MANUFACTURING COMPANYFACTORY OVERHEAD DISTRIBUTION SHEETFor the computation of Departmental Overhead RatesFor the Year Ended December 31, ____AccountsAllocationTotalMachineMachine Assembly PaintingMaterialToolroomFactoryBasisAmount12ServiceOffice
Factory rentFloor areaP24,000P6,600P5,400P4,200P3,000P2,400.00P1,200P1,200Factory insuranceFloor area4,0001,100900700500400200200Depreciation- FactoryMachinery MachineryValue8,0004,0002,0001,000400200300100Reapairs andMachinery maintenancevalue6,4003,2001,60080032016024080Light & powerKw Hours18,6005,5801,8603,2701,86022325582,790Indirect materialsDirect4,0008004001,2001,600chargeIndirect LaborFactory25,00011,7506,2503,0001,25010007501000PayrollFactory Office DirectExpensecharge3,000SuperintendenceNo. ofemployees10,0003,0002,0002,0001,000800400800MiscellaneousDirect Factory Overheadlabor hours7,0003,0001,0002,0001,000Total estimated factory overhead110,00039,03021,41018,62010,9307,19236489170
Distribution of service depts. Factory office 1/5 equally to remaining service depts.Balance equally to productiondepts.1,8341,8341,8341,8349179179170Toolroom: Equally to remaining 9139139139139134,565 Depts.4,565Material Service: No. of workers3,383.252,250.502,250.501,127.759,022.00(9,022.00)Estimated Departmental Factory Overhead110,000.0045,160.2526,412.5023,622.5014,804.75Estimated Machine Hours9,0324,402Estimated Direct Labor Hours20,00010,000Departmental Factory Overhead RatesP5P6P1.18P1.48
TALRUS MANUFACTURING COMPANYACTUAL FACTORY OVERHEAD DISTRIBUTION SHEETFor the computation of Departmental Over (Under) Applied Factory OverheadFor the Year ended Dec. 31, ________AccountsAllocationTotalMachineMachine Assembly PaintingMaterialToolroomFactoryBasisAmount12ServiceOffice
Factory rentFloor areaP24,000P6,600P5,400P4,200P3,200P2,400P1,200P1,200Factory insuranceFloor area4,0001,100900700500400200200Depreciation- FactoryMachinery Machineryvalue8,0004,0002,0001,000400200300100Reapairs andMachinery maintenancevalue10,0005,0002,5001,250500250375125Light & powerKw Hours20,0006,0002,0004,0002,0002,4006003,000Indirect materialsDirectcharge5,0001,0005001,5002,000Indirect LaborFactoryPayroll36,00015,0009,6004,5002,4001,8001,2001,500Factory Office DirectExpensecharge5,0005000SuperintendenceNo. ofemployees10,0003,0002,0002,0001,000800400800MiscellaneousDirect Factory Overheadlabor hours8,0003,5001,2002,2001,100Total Actual Departmental Factory OverheadP130,00045,20026,10021,35012,9008,2504,27511,925Distribution of Service Depts.
Factory Office: 1/5 equally to Remaining Service Depts.; Balance equally to Production Depts.2,3852,3852,3852,3851192.501192.50(11,925)Toolroom: Equally to remaining Depts.1,093.501,093.501,093.501,093.501,093.505,467.50Material Service: No. of Workers3,9512,6342,6341,31710,536(10,536)Actual Departmental Factory OverheadP130,000P52,629.50P32,212.50P27,462.50P17,695.50Applied Departmental Factory Overhead10,100 machine hours x 550,5005,200 machine hours x 631,20023,000 direct labor hours x P1.1827,14012,000 direct labor hrs. X P1.48126,60017,760
Over (Under) Applied Departmental Factory Overhead(3,400)(2,129.50)(1,012.50)(322.50)64.50
The factory overhead ledger showed the following details of Factory Overhead Control:Factory rentP24,000Factory insurance4,000Dapreciation-Factory machinery8,000Reapirs and maintenance10,000Light and power20,000Indirect materials5,000Indirect labor36,000Factory office expense5,000Superintendence10,000Miscellaneous factory overhead8,000 The factory overhead distribution sheets are shown above.
Sheet1Estimated factory overhead for the year and the allocation bases are as follows:Factory rent24,000Floor areaFactory insurance4,000Floor areaDepreciation-Factory Machinery8,000Machinery valueRepairs & maintenance6,400Machinery valueLight & power18,600kilowatt hoursIndirect materials4,000Direct ChargeIndirect labor25,000Factory payrollFactory office expense3,000Direct ChargeSuperintendence1,000No. of employeesMiscellaneous factory overhead7,000Direct labor hours
Sheet1The service department costs are to be distributed in the following order:1. Factory office-1/5 equally to the remaining sercvice departments and remaining 4/5 equally to the production departments.2. Toolroom-equally to the remaining departments3. Material service-based on the number of workersThe departmental overhead rates are to be computed as follows:Machine 1 and Machine 2 - Machine hours basisAssembly and Painting - Direct labor hour basis
Sheet1At the close of the current year the cost records yielded the following information:Direct Labor HoursFactory PayrollMachine HoursMachine 134,000P 5000010,100Machine 211,00032,0005,200Assembly23,00015,000Painting12,0008,000Material0.0Service6,000Toolroom4,000Factory0.0Office5,000
Sheet1TALRUS MANUFACTURING COMPANYFACTORY OVERHEAD DISTRIBUTION SHEETFor the computation of Departmental Overhead RatesFor the Year Ended December 31,ACCOUNTSAllocationTotalMachineMachine Assembly PaintingMaterialToolroomFactoryBasisAmount12ServiceOfficeFactory RentFloor areaP 24,000P 6,600P 5,400P 4,200P 3,000P 2,400P 1,200P 1,200Factory InsuranceFloor area4,0001,100900700500400200200Depreciation- FactoryMachinery MachineryValue8,0004,0002,0001,000400200300100Reapairs andMachinery MaintenanceValue6,4003,2001,60080032016024080Light & PowerKw Hours18,6005,5801,8603,2701,8602,2325582,790Indirect materialsDirect4,0008004001,2001,600ChargeIndirect LaborFactory25,00011,7506,2503,0001,2501,0007501,000PayrollFactory Office DirectExpenseCharge3,000SuperintendenceNo. ofEmployees10,0003,0002,0002,0001,000800400800MiscellaneousDirect Factory OverheadLabor hours7,0003,0001,0002,0001,000Total estimated factory overheadP 110,00039,03021,41018,62010,9307,1923,6489,170
Distribution of service depts. Factory office 1/5 equally to remaining service depts.Balance equally to productiondepts.1,8341,8341,8341,8349179179170Toolroom: Equally to remaining 9139139139139134,565 Depts.4,565Material Service: No. of workers3,383.252,250.502,250.501,127.759,022.00(9,022.00)Estimated Departmental Factory Overhead110,000.0045,160.2526,412.5023,622.5014,804.75Estimated Machine Hours9,0324,402Estimated Direct Labor Hours20,00010,000Departmental Factory Overhead Rates561.181.48
Sheet1TALRUS MANUFACTURING COMPANYFACTORY OVERHEAD DISTRIBUTION SHEETFor the computation of Departmental Overhead RatesFor the Year Ended December 31,ACCOUNTSAllocationTotalMachineMachine Assembly PaintingMaterialToolroomFactoryBasisAmount12ServiceOfficeFactory RentFloor areaP 24,000P 6,600P 5,400P 4,200P 3,000P 2,400P 1,200P 1,200Factory InsuranceFloor area4,0001,100900700500400200200Depreciation- FactoryMachinery MachineryValue8,0004,0002,0001,000400200300100Reapairs andMachinery MaintenanceValue6,4003,2001,60080032016024080Light & PowerKw Hours18,6005,5801,8603,2701,8602,2325582,790Indirect materialsDirect4,0008004001,2001,600ChargeIndirect LaborFactory25,00011,7506,2503,0001,2501,0007501,000PayrollFactory Office DirectExpenseCharge3,000SuperintendenceNo. ofEmployees10,0003,0002,0002,0001,000800400800MiscellaneousDirect Factory OverheadLabor hours7,0003,0001,0002,0001,000Total estimated factory overheadP 110,00039,03021,41018,62010,9307,1923,6489,170
Distribution of Service Depts.Factory Office: 1/5 Equally ToRemaining Service Depts.Balance Equally To ProductionDepts.1,8341,8341,8341,8349179179170Toolroom: Equally to Remaining 9139139139139134,565 Depts.4,565Material Service: No. of Workers3,383.252,250.502,250.501,127.759,022.00(9,022.00)Estimated Departmental Factory Overhead110,000.0045,160.2526,412.5023,622.5014,804.75Estimated Machine Hours9,0324,402Estimated Direct Labor Hours20,00010,000Departmental Factory Overhead Rates561.181.48
Sheet1The factory overhead ledger showed the following details of Factory Overhead Control:
Factory rentP 24,000Factory insurance4,000Dapreciation-Factory machinery8,000Reapirs and maintenance10,000Light and power20,000Indirect materials5,000Indirect labor36,000Factory office expense5,000Superintendence10,000Miscellaneous factory overhead8,000 The factory overhead distribution sheets are shown above.
Sheet1TALRUS MANUFACTURING COMPANYACTUAL FACTORY OVERHEAD DISTRIBUTION SHEETFor the Computation of Departmental Over (Under) Applied Factory OverheadFor the Year ended December 31, 20XXACCOUNTS Allocation Total Machine Machine Assembly Painting MaterialToolroomFactory Basis Amount 12 Service OfficeFactory rentFloor areaP24,000P6,600P5,400P4,200P3,200P2,400P1,200P1,200Factory InsuranceFloor area4,0001,100900700500400200200Depreciation- FactoryMachinery MachineryValue8,0004,0002,0001,000400200300100Reapairs andMachinery MaintenanceValue10,0005,0002,5001,250500250375125Light & PowerKw Hours20,0006,0002,0004,0002,0002,4006003,000Indirect MaterialsDirectCharge5,0001,0005001,5002,000Indirect LaborFactoryPayroll36,00015,0009,6004,5002,4001,8001,2001,500Factory Office DirectExpenseCharge5,0005000SuperintendenceNo. ofEmployees10,0003,0002,0002,0001,000800400800MiscellaneousDirect Factory OverheadLabor Hours8,0003,5001,2002,2001,100Total Actual Departmental Factory OverheadP130,00045,20026,10021,35012,9008,2504,27511,925
Distribution of Service Depts.Factory Office: 1/5 equally to Remaining Service Depts.; Balance equally to Production Depts.2,3852,3852,3852,3851192.501192.50(11,925)Toolroom: Equally to remaining Depts.1,093.501,093.501,093.501,093.501,093.505,467.50Material Service: No. of Workers3,9512,6342,6341,31710,536(10,536)Actual Departmental Factory OverheadP130,000P52,629.50P32,212.50P27,462.50P17,695.50Applied Departmental Factory Overhead10,100 machine hours x 550,5005,200 machine hours x 631,20023,000 direct labor hours x P1.1827,14012,000 direct labor hrs. X P1.48126,60017,760
Over (Under) Applied Departmental Factory Overhead(3,400)(2,129.50)(1,012.50)(322.50)64.50
The factory overhead ledger showed the following details of Factory Overhead Control:
Factory rent24,000Factory insurance4,000Dapreciation-Factory machinery8,000Reapirs and maintenance10,000Light and power20,000Indirect materials5,000Indirect labor36,000Factory office expense5,000Superintendence10,000Miscellaneous factory overhead8,000
The factory overhead distribution sheets are shown above.
Sheet1TALRUS MANUFACTURING COMPANYACTUAL FACTORY OVERHEAD DISTRIBUTION SHEETFor the Computation of Departmental Over (Under) Applied Factory OverheadFor the Year ended December 31, 20XXACCOUNTS Allocation Total Machine Machine Assembly Painting MaterialToolroomFactory Basis Amount 12 Service OfficeFactory rentFloor areaP24,000P6,600P5,400P4,200P3,200P2,400P1,200P1,200Factory InsuranceFloor area4,0001,100900700500400200200Depreciation- FactoryMachinery MachineryValue8,0004,0002,0001,000400200300100Reapairs andMachinery MaintenanceValue10,0005,0002,5001,250500250375125Light & PowerKw Hours20,0006,0002,0004,0002,0002,4006003,000Indirect MaterialsDirectCharge5,0001,0005001,5002,000Indirect LaborFactoryPayroll36,00015,0009,6004,5002,4001,8001,2001,500Factory Office DirectExpenseCharge5,0005000SuperintendenceNo. ofEmployees10,0003,0002,0002,0001,000800400800MiscellaneousDirect Factory OverheadLabor Hours8,0003,5001,2002,2001,100Total Actual Departmental Factory OverheadP130,00045,20026,10021,35012,9008,2504,27511,925
Distribution of Service Depts.Factory Office: 1/5 equally to Remaining Service Depts.; Balance equally to Production Depts.2,3852,3852,3852,3851192.501192.50(11,925)Toolroom: Equally to Remaining Depts.1,093.501,093.501,093.501,093.501,093.505,467.50Material Service: No. of Workers3,9512,6342,6341,31710,536(10,536)Actual Departmental Factory OverheadP130,000P52,629.50P32,212.50P27,462.50P17,695.50Applied Departmental Factory Overhead10,100 machine hours x 550,5005,200 machine hours x 631,20023,000 direct labor hours x P1.1827,14012,000 direct labor hrs. X P1.48126,60017,760Over (Under) Applied Departmental Factory Overhead(3,400)(2,129.50)(1,012.50)(322.50)64.50
The factory overhead ledger showed the following details of Factory Overhead Control:
Factory rent24,000Factory insurance4,000Dapreciation-Factory machinery8,000Reapirs and maintenance10,000Light and power20,000Indirect materials5,000Indirect labor36,000Factory office expense5,000Superintendence10,000Miscellaneous factory overhead8,000
The factory overhead distribution sheets are shown above.