Indirect Cost Allocation: Direct Method Sprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded: Melting Department direct overhead $180,000 Molding Department direct overhead 400,000 General plant management 100,000 Plant security 35,000 Other pertinent data follow: Melting Molding Number of employees 30 55 Space occupied (square feet) 10,000 30,000 Machine hours 10,000 2,000 Direct labor hours 4,000 20,000 (a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments. Instructions: Do not round computations until you final answers. The, round your answer to the nearest whole number. Department Total Melting Molding General Plant Management Answer Answer Answer Plant security Answer Answer Answer (b) Determine the total departmental overhead costs for the Melting and Molding Departments. Use rounded answers to compute total departmental overhead costs for each department. Melting $Answer Molding $Answer (c) Assuming the Melting Department uses machine hours and the Molding Department uses direct labor hours to apply overhead to production, calculate the overhead rate for each production department. Use rounded answers to compute and then round final answers to two decimal places. Melting $Answer Molding $Answer
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Indirect Cost Allocation: Direct Method
Sprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded:
| Melting Department direct overhead | $180,000 |
| Molding Department direct overhead | 400,000 |
| General plant management | 100,000 |
| Plant security | 35,000 |
Other pertinent data follow:
| Melting | Molding | |
|---|---|---|
| Number of employees | 30 | 55 |
| Space occupied (square feet) | 10,000 | 30,000 |
| Machine hours | 10,000 | 2,000 |
| Direct labor hours | 4,000 | 20,000 |
(a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments.
Instructions: Do not round computations until you final answers. The, round your answer to the nearest whole number.
| Department | Total | Melting | Molding |
|---|---|---|---|
| General Plant Management | Answer | Answer | Answer |
| Plant security | Answer | Answer | Answer |
(b) Determine the total departmental overhead costs for the Melting and Molding Departments.
Use rounded answers to compute total departmental overhead costs for each department.
Melting $Answer
Molding $Answer
(c) Assuming the Melting Department uses machine hours and the Molding Department uses direct labor hours to apply overhead to production, calculate the overhead rate for each production department.
Use rounded answers to compute and then round final answers to two decimal places.
Melting $Answer
Molding $Answer
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