Direct Method, Reciprocal Method, Overhead Rates

Macalister Corporation is developing departmental overhead ratesbased on direct labor hours for its two productiondepartments—Molding and Assembly. The Molding Department employs 19people, and the Assembly Department employs 75 people. Each personin these two departments works 1,910 hours per year. Theproduction-related overhead costs for the Molding Department arebudgeted at $239,000, and the Assembly Department costs arebudgeted at $99,000. Two support departments—Engineering andGeneral Factory—directly support the two production departments andhave budgeted costs of $221,000 and $379,000, respectively. Theproduction departments’ overhead rates cannot be determined untilthe support departments’ costs are properly allocated. Thefollowing schedule reflects the use of the Engineering Department’sand General Factory Department’s output by the variousdepartments.

	Engineering	General Factory	Molding	Assembly
Engineering hours	—	2,500	2,200	7,800
Square feet	88,200	—	388,080	111,720

For all requirements, round allocation ratios to foursignificant digits and round allocated costs to the nearestdollar.

Required:

1. Calculate the overhead rates per directlabor hour for the Molding Department and the Assembly Departmentusing the direct allocation method to charge the productiondepartments for support department costs. Round final answers tothe nearest cent.

	Overhead rate per DLH
Molding
Assembly

2. Calculate the overhead rates per directlabor hour for the Molding Department and the Assembly Departmentusing the reciprocal method to charge support department costs toeach other and to the production departments. Round final answersto the nearest cent. Round your intermediate calculations to fourdecimal places.

	Overhead rate per DLH
Molding
Assembly