Duff Company Uses a Job-Order Costing System to Compute Product

question 50

Essay

Duff Company uses a job-order costing system to compute product costs.There are two producing departments (P1 and P2)and two support departments (S1 and S2).The costs incurred in S1 and S2 are allocated to Departments A and B and included in their factory overhead rates for costing products.S1 costs are allocated based on the number of employees,S2 costs are allocated based on direct labour hours,and the production departmental overhead rates are also based on direct labour hours.The following data are available for a recent period:
$\begin{array}{|l|c|c|c|c|} \hline& \text { S1 } & \text { S2 } & \text { P1 } & \text { P2 } \\\hline \text { Direct department costs } & \$ 12,000 & \$ 18,000 & \$ 70,000 & \$ 117,500 \\\hline \text { Number of employees } & 8 & 12 & 48 & 72 \\\hline \text { Direct labour hours } & 450 & 325 & 2,250 & 1,800\\\hline\end{array}$

a.Prepare a schedule allocating the support department costs to the producing departments using the sequential allocation method.The department with the greatest percentage of interdepartmental services should be allocated first.
b.Determine the overhead rates per direct labour hour for P1 and P2.
c.Job A2 was completed during the period at a cost of $26,000 for direct materials and direct labour costs.This job required 21 direct labour hours in Department P1 and 15 direct labour hours in Department P2.What was the total cost of Job A2?

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