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FSI Company allocates support department costs to production departments before establishing predetermined overhead rates for use in product costing.
Eng Support costs are allocated to productive departments based on time of service while IT costs are allocated based on IT hours
Department EngSupport IT Cutting Finishing Total
Departmental Overhead 1,000,000 2,000,000 4,000,000 2,500,000 9,500,000
Time of service 40 100 1200 700 2040
IT hours 1,000 2,000 8,500 11,500 23,000
Cutting uses machine hours as a base for overhead allocation and expects to use 60,000 MH this year
Finishing uses direct labor as a base for overhead allocation and expects to use 90,000 DLH this year.
During the year job 280 is completed The job required:
DLH 500 250
MH 600 400
1.Complete a cost allocation calculation/table using the step method to put all overhead amounts into the productive departments
2. Calculate the predetermined overhead rates for the productive departments
3.Calculate the total overhead applied to job 280
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