menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows: The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders. Required: 1. Allocate the overhead costs to the producing departments using the direct method. (Take allocation ratios out to four significant digits. Round allocated costs to the nearest dollar.) 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)

BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

Solutions

Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 7, Problem 20E
Textbook Problem
1654 views

Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:

Chapter 7, Problem 20E, Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in

The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders.

Required:

  1. 1. Allocate the overhead costs to the producing departments using the direct method. (Take allocation ratios out to four significant digits. Round allocated costs to the nearest dollar.)
  2. 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)

1.

To determine

Allocate the overhead costs to the producing departments using the direct method.

Explanation of Solution

Departmental overhead rates: Departmental overhead rate is calculated by adding the allocated service costs to the overhead costs that are directly noticeable to the producing departments and dividing this total by some measure of activity, such as direct labor hours or machine hours.

Direct method of allocation: In direct method of allocation, companies assign support department costs only to the producing departments. This method is the simpler and straightforward for assigning support department costs.

Compute allocation ratios:

 PesticideLiquid Fertilizer
Square feet (1)0.4667(4)0.5333
Machine hours (2)0.75(5)0.25
Purchase orders (3)0.6667(6)0.3333

Table (1)

Compute allocation of costs:

 

Workings

(Allocationratio×Overhead)

 Pesticide

Workings

(Allocationratio×Overhead)

 Liquid Fertilizer
Direct costs   $78,900   $107,800
Power(0.7500 × $90,000) $67,500(0.2500 × $90,000)  $22,500
General Factory(0.4667 × $314,000) $146,544(0.5333 × $314,000)  $167,456
Purchasing(0.6667 × $167,000) $111,339(0.3333 × $167,000) $ 55,661
Total  $404,283  $353,417

Table (2)

Working notes:

(1)Calculate the allocation of square feet to Pesticide department:

Allocationratio of square feet to Pesticide department}=Allocationofsquarefeettopesticide(Allocationofsquarefeettopesticide+Allocationofsquarefeettofertilizer)=$4,200$4,200+$4,800=$4,200$9,000=0.4667

(2)Calculate the allocation of machine hours to Pesticide department:

Allocationratio of machinehours to Pesticide department}=Allocationofmachinehourstopesticide(Allocationofmachinehourstopesticide+Allocationofmachinehourstofertilizer)=$24,000$24,000+$8,000=$24,000$32,000=0

2.

To determine

Compute departmental overhead rates using machine hours.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 7 Solutions

Cornerstones of Cost Management (Cornerstones Series)
Show all chapter solutions
add
Ch. 7 - Why is the dual-rate charging method better than...Ch. 7 - Explain the difference between the direct method...Ch. 7 - The reciprocal method of allocation is more...Ch. 7 - What is a joint cost? How does it relate to...Ch. 7 - How do joint costs differ from other common costs?Ch. 7 - The expected costs for the Maintenance Department...Ch. 7 - The expected costs for the Maintenance Department...Ch. 7 - Valron Company has two support departments, Human...Ch. 7 - Refer to Cornerstone Exercise 7.3. Now assume that...Ch. 7 - Refer to Cornerstone Exercise 7.3. Now assume that...Ch. 7 - Refer to Cornerstone Exercise 7.3 and solve for...Ch. 7 - Orchard Fresh, Inc., purchases apples from local...Ch. 7 - Refer to Cornerstone Exercise 7.7. Assume that...Ch. 7 - Refer to Cornerstone Exercise 7.7. Assume that...Ch. 7 - A company manufactures three products, L-Ten,...Ch. 7 - Refer to Cornerstone Exercise 7.10. (Round...Ch. 7 - Classify each of the following departments in a...Ch. 7 - Classify each of the following departments in a...Ch. 7 - Identify some possible causal factors for the...Ch. 7 - Dr. Fred Poston, Dermatologist to the Stars, has a...Ch. 7 - Samantha and Rashida are planning a trip to Padre...Ch. 7 - Jeff McMillan owns a small neighborhood shopping...Ch. 7 - Kumar, Inc., evaluates managers of producing...Ch. 7 - Refer to the data in Exercise 7.18. When the...Ch. 7 - Jasmine Company manufactures both pesticide and...Ch. 7 - Refer to the data in Exercise 7.20. The company...Ch. 7 - Eilers Company has two producing departments and...Ch. 7 - Refer to the data in Exercise 7.22. The company...Ch. 7 - Refer to the data in Exercise 7.22. The support...Ch. 7 - Alomar Company manufactures four products from a...Ch. 7 - Refer to Exercise 7.25 and allocate the joint...Ch. 7 - Pacheco, Inc., produces two products, overs and...Ch. 7 - Minor Co. has a job order cost system and applies...Ch. 7 - A CPA would recommend changing from plantwide...Ch. 7 - A company uses charging rates to allocate service...Ch. 7 - Chester Company provided information on overhead...Ch. 7 - Which of the following statements is true? a. The...Ch. 7 - Biotechtron, Inc., has two research laboratories...Ch. 7 - AirBorne is a small airline operating out of...Ch. 7 - Duweynie Pottery, Inc., is divided into two...Ch. 7 - Macalister Corporation is developing departmental...Ch. 7 - Farleigh Petroleum, Inc., is a small company that...Ch. 7 - Welcome Inns is a chain of motels serving business...Ch. 7 - Sonimad Sawmill, Inc. (SSI), purchases logs from...Ch. 7 - House Corporation Board (HCB) of Tri-Gamma...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
What is the objective of a strike?

Economics (MindTap Course List)

What is activity-based product costing?

Managerial Accounting: The Cornerstone of Business Decision-Making

REAL RISK-FREE RATE You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your b...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)