Overhead Allocation Based on Activity DriversDepartment Details:Department A:Direct Costs: $700,000Indirect Costs: $400,000Allocation Base: Direct Labor...
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Accounting
Overhead Allocation Based on Activity Drivers
Department Details:
- Department A:
- Direct Costs: $700,000
- Indirect Costs: $400,000
- Allocation Base: Direct Labor Hours (DLH)
- DLH Used: 35,000
- Department B:
- Direct Costs: $650,000
- Indirect Costs: $350,000
- Allocation Base: Machine Hours (MH)
- MH Used: 30,000
Requirements:
- Allocate overhead costs to Department A and Department B using their respective allocation bases.
- Calculate the total cost for each department.
- Present the overhead allocation in a detailed table format.
- Analyze the impact of overhead allocation on departmental performance.
- Discuss the implications of overhead allocation on product costing and pricing.
- Evaluate the effectiveness of different overhead allocation methods.
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