Direct Method and Overhead Rates
Delille Company manufactures both traditional toothpaste and gel tooth paste, with each type of tooth paste produced in separated epartments. Three support departments support the productiondepartments: power, general factory, and personnel. Budgeted dataon the five departments are as follows:
| Support Departments |
Producing Departments |
| Power |
General Factory |
Personnel |
|
Traditional |
Gel |
| Overhead |
$90,000 |
$300,000 |
$120,000 |
$137,500 |
$222,500 |
| Machine hours |
- |
1,403 |
1,345 |
8,000 |
24,000 |
| Square feet |
3,600 |
- |
2,400 |
10,800 |
7,200 |
| Number of employees |
8 |
13 |
7 |
18 |
14 |
The company does not break overhead into fixed and variablecomponents. The bases for allocation are: power-machine hours,general factory-square feet, and personnel-number of employees.
You may use the attached spreadsheet to solve this activity. Youwill find the spreadsheet by clicking on the paper clip found inthe upper left hand corner of the screen.
Required:
1) Determine total product cost using the direct method of overhead allocation. (Take allocation ratios out to four significant digits.)
Traditional: $
Gel: $
2) Using machine hours, compute departmental overhead rates thatproducing departments use to assign overhead costs to products. Round to two decimal places.
Traditional: $ per MHr
Gel: $ per MHr