Allocate the service cost using the Direct method. Servicing DepartmentsDepartment A Department B Department C Maintenance Engineering54,000Producing Departments / Main DepartmentTotalOverhead costs80,00090,00050,00012,000286,000Engineering hours used8004004004002,000Maintenance hours used8002002004001,600

The following computations are done for the allocation of service costs to the respective revenue…

Servicing Departments Department A Department B Department C Maintenance Engineering Producing Departments / Main Department Total Dverhead costs 80,000 90,000 50,000 12,000 54,000 286,000 Engineering hours used Maintenance hours used 800 400 400 400 2,000 800 200 200 400 1,600

Servicing Departments Department A Department B Department C Maintenance Engineering Producing Departments / Main Department Total Dverhead costs 80,000 90,000 50,000 12,000 54,000 286,000 Engineering hours used Maintenance hours used 800 400 400 400 2,000 800 200 200 400 1,600

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 2BE: Support department allocations The centralized computer technology department of Hardy Company has...

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Allocate the service cost using the Direct method.

Servicing Departments
Department A Department B Department C Maintenance Engineering
54,000
Producing Departments / Main Department
Total
Overhead costs
80,000
90,000
50,000
12,000
286,000
Engineering hours used
800
400
400
400
2,000
Maintenance hours used
800
200
200
400
1,600

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