Dodge City Corporation Is Developing Departmental Overhead Rates Based on Direct

question 45

Essay

Dodge City Corporation is developing departmental overhead rates based on direct labor hours for its two production departments, Molding and Assembly. The Molding Department worked 20,000 hours during the period just ended, and the Assembly Department worked 40,000 hours. The overhead costs incurred by Molding and Assembly were $151,250 and $440,750, respectively.
Two service departments, Repair and Power, directly support the two production departments. These service departments have costs of $90,000 and $250,000, respectively. The following schedule reflects the use of Repair and Power's output by the various departments:

Required:
A. Allocate the company's service department costs to production departments by using the direct method.
B. Calculate the overhead application rates of the production departments. Hint: Consider both directly traceable and allocated overhead when deriving your answer.
C. Allocate the company's service department costs to production departments by using the step-down method. Begin with the Power Department, and round calculations to the nearest dollar.

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Definitions:

Selective Perception

The cognitive process by which individuals perceive what they want in the mass of stimuli around them, ignoring other information.

Interest

The sensation of being curious to acquire knowledge or information about someone or something.

Perception

The way in which something is regarded, understood, or interpreted by an individual or group.

Sensory Information

Describes data gathered through the senses such as sight, sound, touch, taste, and smell, which is used by organisms to interact with their environment.