Department: Direct Charges Square Footage Labor Hours Human Resources $135,000 — — Maintenance 100,0

Department:

Direct Charges

Square Footage

Labor Hours

Human Resources

$135,000

Maintenance

100,000

5,000

Machining

275,000

2,000

20,000

Assembly

225,000

3,000

25,000

The Human Resources Department services all departments

Requirements:

(1)

Distribute the service department costs using the direct distribution method

(2)

Distribute the service department costs using the sequential distribution method with the

department servicing the greatest number of other departments being distributed first

(3)

Using the results from the direct distribution method, calculate the predetermined

factory overhead rate for the machining department using labor hours as the basis

8

You have been hired by Thompson Waterfall Manufacturing

Your first task is

examine different distribution methods for applying factory overhead to the

various production orders that are processed during a year

The following information was taken from the annual budget:

Direct labor hours

80,000

Machine hours

160,000

Manufacturing costs:

Direct labor

$400,000

Direct materials

190,000

Indirect labor

65,000

Electric power

46,000

Payroll taxes

12,800

Machine maintenance and repair

10,200

Factory supplies

17,000

Factory heat and light

15,000

Depreciation, taxes, and insurance:

Factory buildings

124,000

Machinery

310,000

$1,190,000

a

Determine the following factory overhead application rates under each of the following

methods:

(1)

Direct labor cost

(2)

Direct labor hours

(3)

Machine hours

b

Prepare a schedule showing the prime cost and total cost of Order 329 with the factory

overhead costs applied on each of the three bases; Job Cost Sheet 329 shows the following:

raw materials, $6,200; direct labor, 6,000 hours and $29,000; machine hours, 2,800