Al Deena Manufacturing LLC have three departments which are regarded as production departments. Service departments’ costs are distributed to these production departments. Estimates of factory overhead costs to be incurred by each department in the forthcoming year are as follows. Data required for distribution is also shown against each department. Factory overhead of Production Departments: Department X is RO 210,000, Department Y is RO 65,000 and Department Z is RO 70,000. Overhead expenses of Service Departments: Department P RO 36,000, Department Q is RO 110,000, Department R is RO 120,000 and Department S is RO 60,000. Direct labor hours of Department X is 4,000 hours, Department Y is 3,000 hours and Department Z is 3,000 hours. No of employees working in Department X is 100 workers, Department Y is 125 workers and Department Z is 75 workers. Area in square meters used by Department X is 3,000 square meters, Department Y is 1,500 square meters and Department Z is 1,500 square meters. The overhead costs of the four service departments are distributed in the same order, viz., P, Q, R and S respectively on the following basis. Department P based on Number of employees, Department Q based on Direct labor hours, Department R based on Area in square meters and department S based on Direct labor hours. Identify the total cost of Department Z after distributing the overhead costs of four service departments. a. RO 106,000 b. RO 160,000 c. RO 161,000 d. RO 350,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 28E: Minor Co. has a job order cost system and applies overhead based on departmental rates. Service...

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Al Deena Manufacturing LLC have three departments which are regarded as production departments. Service departments’ costs are distributed to these production departments. Estimates of factory overhead costs to be incurred by each department in the forthcoming year are as follows. Data required for distribution is also shown against each department. Factory overhead of Production Departments: Department X is RO 210,000, Department Y is RO 65,000 and Department Z is RO 70,000. Overhead expenses of Service Departments: Department P RO 36,000, Department Q is RO 110,000, Department R is RO 120,000 and Department S is RO 60,000. Direct labor hours of Department X is 4,000 hours, Department Y is 3,000 hours and Department Z is 3,000 hours. No of employees working in Department X is 100 workers, Department Y is 125 workers and Department Z is 75 workers. Area in square meters used by Department X is 3,000 square meters, Department Y is 1,500 square meters and Department Z is 1,500 square meters. The overhead costs of the four service departments are distributed in the same order, viz., P, Q, R and S respectively on the following basis. Department P based on Number of employees, Department Q based on Direct labor hours, Department R based on Area in square meters and department S based on Direct labor hours. Identify the total cost of Department Z after distributing the overhead costs of four service departments. a. RO 106,000 b. RO 160,000 c. RO 161,000 d. RO 350,000

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