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Franklin Corporation has three operating departments (Fabricating, Assembly, and Finishing) and two service departments (Custodial...

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Accounting

Franklin Corporation has three operating departments (Fabricating, Assembly, and Finishing) and two service departments (Custodial and Administrative). Custodial services are allocated based on square feet and administrative services are allocated base on the number of employees. The following information has been provided:

Custodial

Administration

Fabricating

Assembly

Finishing

Department Costs

$250,000

$400,000

--

--

--

Number of employees

10

--

80

100

60

Square feet

--

15,000

30,000

35,000

20,000

The normal capacity for fabricating is 1,000 hours per month; normal capacity for assembly is 500 hours per month days; and normal capacity for finishing is 300 units.

Required: Determine the overhead rate for the three production areas. Allocate the service department costs to the revenue areas using the direct method.

Required: Determine the total cost for the three revenue areas. Allocate the service department costs to the revenue areas using the step method, starting with Administration.

Required: Determine the total cost for the three revenue areas. Allocate the service department costs to the revenue areas using the reciprocal method.

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