Let's use Porter Company, as an example. Porter has two producing departments Fabricating and Assembly and three support departments Maintenance, Human Resources HR and General Factory GF Porter provided the following information on the five departments:
Maintenance HR GF Fabricating Assembly
Direct overhead cost $ $ $ $ $
Machine hours
Direct labor hours
Square footage
Porter uses the direct method of support department cost allocation. Maintenance is allocated based on machine hours, HR on the basis of direct labor hours, and GF on the basis of square footage. The Fabricating overhead rate is based on machine hours and the Assembly overhead rate is based on direct labor hours.
Fill in the following table to allocate support department costs to the producing departments. Round all allocation ratios to four significant digits and all allocated amounts to the nearest dollar. If an amount box does not require an entry, leave it blank or enter
Maintenance HR GF Fabricating Assembly
Direct overhead cost $ $ $ $ $
Allocate:
Maintenance fill in the blank ffaffffae fill in the blank ffaffffae fill in the blank ffaffffae fill in the blank ffaffffae fill in the blank ffaffffae
Human Resources fill in the blank ffaffffae fill in the blank ffaffffae fill in the blank ffaffffae fill in the blank ffaffffae fill in the blank ffaffffae
General Factory fill in the blank ffaffffae fill in the blank ffaffffae fill in the blank ffaffffae fill in the blank ffaffffae fill in the blank ffaffffae
Total after allocation $fill in the blank ffaffffae $fill in the blank ffaffffae $fill in the blank ffaffffae $fill in the blank ffaffffae $fill in the blank ffaffffae
Notice that after allocation, zero dollars remain in the support departments and all overhead cost has been allocated to the producing departments. As a check on your work, add up all direct overhead costs from the first line it equals $ Then add the totals after allocation again, it equals $
Finally, calculate the overhead rates rounded to the nearest cent for Fabricating and Assembly.
Fabricating overhead rate $fill in the blank ffaffffae per machine hour
Assembly overhead rate $fill in the blank ffaffffae per direct labor hour