Direct Method Producing Service

Ratio K L M X
Direct Department Cost 28,000.00 17,000.00 12,000.00 8,000.00
Allocation of Indirect Dept Cost
Rent 30:18:6:6:4 6,000.00 3,600.00 1,200.00 1,200.00
Machine Insurance 24:10:8:4:2 3,000.00 1,250.00 1,000.00 500.00
Telephone Equally 640.00 640.00 640.00 640.00
Depreciation 24:10:8:4:2 9,000.00 3,750.00 3,000.00 1,500.00
Supervisor Salaries 32:18:10 12,800.00 7,200.00 4,000.00
Heating and Lighting 15:12:8:2:3 2,400.00 1,920.00 1,280.00 320.00
Total allocated indirect cost 33,840.00 18,360.00 11,120.00 4,160.00
Total Budgeted OH 61,840.00 35,360.00 23,120.00 12,160.00
Allocation of Service Department Costs
X 50:25:20 6,400.00 3,200.00 2,560.00 (12,160.00)
Y 20:30:40 1,982.22 2,973.33 3,964.44
Total allocated Service Dept. Cost 8,382.22 6,173.33 6,524.44 (12,160.00)
Total Overhead Cost 70,222.22 41,533.33 29,644.44 -
Divide by Overhead Base 3,200.00 63,000.00 12,000.00
Departmental FOH Rates 21.94 66% 2.47
/DLhr of DLC /MHr
Service
Y Total Cost
6,000.00 71,000.00

800.00 12,800.00
250.00 6,000.00
640.00 3,200.00
750.00 18,000.00
24,000.00
480.00 6,400.00
2,920.00 70,400.00
8,920.00 141,400.00

(8,920.00)
(8,920.00)
-
 (a) (b) (c)
Budgeted Overhead
Direct 71,000.00 71,000.00 71,000.00
Indirect 70,400.00 70,400.00 70,400.00
Total Overhead 141,400.00 141,400.00 141,400.00
Budgeted Bases 6,000.00 40,000.00 10,000.00
23.57 3.54 14.14
FOH rates
/DLHr /MHr /Unit

Actual activity for the base 6,020.00 39,980.00 10,015.00

FOH rates 23.57 3.54 14.14
Applied Factory Overhead 141,871.33 141,329.30 141,612.10
Direct Method Producing Service
Ratio K L M X Y
Direct Department Cost 28,000.00 17,000.00 12,000.00 8,000.00 6,000.00
Allocation of Indirect Dept'l Cost
Rent 30:18:6:6:4 6,000.00 3,600.00 1,200.00 1,200.00 800.00
Machine Insurance 24:10:8:4:2 3,000.00 1,250.00 1,000.00 500.00 250.00
Telephone Equally 640.00 640.00 640.00 640.00 640.00
Depreciation 24:10:8:4:2 9,000.00 3,750.00 3,000.00 1,500.00 750.00
Supervisor Salaries 32:18:10:0:0 12,800.00 7,200.00 4,000.00 - -
Heating and Lighting 15:12:8:2:3 2,400.00 1,920.00 1,280.00 320.00 480.00
Total allocated indirect cost 33,840.00 18,360.00 11,120.00 4,160.00 2,920.00
Total Budgeted OH 61,840.00 35,360.00 23,120.00 12,160.00 8,920.00
Allocation of Service Department Costs
X 50:25:20 6,400.00 3,200.00 2,560.00 (12,160.00)
Y 20:30:40 1,982.22 2,973.33 3,964.44 (8,920.00)
Total allocated Service Dept. Cost 8,382.22 6,173.33 6,524.44 (12,160.00) (8,920.00)
Total Overhead Cost 70,222.22 41,533.33 29,644.44 - -
Divide by Overhead Base 3,200.00 63,000.00 12,000.00
21.94 66% 2.47
Departmental FOH Rates
/DLhr of DLC /MHr

Step Method Producing Service

Ratio K L M X Y
Direct Department Cost 28,000.00 17,000.00 12,000.00 8,000.00 6,000.00
Allocation of Indirect Dept'l Cost
Rent 30:18:6:6:4 6,000.00 3,600.00 1,200.00 1,200.00 800.00
Machine Insurance 24:10:8:4:2 3,000.00 1,250.00 1,000.00 500.00 250.00
Telephone Equally 640.00 640.00 640.00 640.00 640.00
Depreciation 24:10:8:4:2 9,000.00 3,750.00 3,000.00 1,500.00 750.00
Supervisor Salaries 32:18:10:0:0 12,800.00 7,200.00 4,000.00 - -
Heating and Lighting 15:12:8:2:3 2,400.00 1,920.00 1,280.00 320.00 480.00
Total allocated indirect cost 33,840.00 18,360.00 11,120.00 4,160.00 2,920.00
Total Budgeted OH 61,840.00 35,360.00 23,120.00 12,160.00 8,920.00
Allocation of Service Department Costs
X 50:25:20:5 6,080.00 3,040.00 2,432.00 (12,160.00) 608.00
Y 20:30:40 2,117.33 3,176.00 4,234.67 (9,528.00)
Total allocated Service Dept. Cost 8,197.33 6,216.00 6,666.67 (12,160.00) (8,920.00)
Total Overhead Cost 70,037.33 41,576.00 29,786.67 - -
Divide by Overhead Base 3,200.00 63,000.00 12,000.00
21.89 66% 2.48
Departmental FOH Rates
/DLhr of DLC /MHr
Total Cost
71,000.00

12,800.00
6,000.00
3,200.00
18,000.00
24,000.00
6,400.00
70,400.00
141,400.00

Total Cost
71,000.00

12,800.00
6,000.00
3,200.00
18,000.00
24,000.00
6,400.00
70,400.00
141,400.00
 Services Provided by: S1 S2 S3 P1 P2
S1 10 15 25 50
S2 5 20 45 30
S3 10 45 45

Direct S1 S2 S3 P1 P2
S1 60,000.00 25 50
S2 150,000.00 45 30
S3 100,000.00 45 45
60,000.00 150,000.00 100,000.00
S1 (60,000.00) 20,000.00 40,000.00
S2 (150,000.00) 90,000.00 60,000.00
S3 (100,000.00) 50,000.00 50,000.00

Step S1 S2 S3 P1 P2
Second S1 60,000.00 15 25 50
First S2 150,000.00 5 20 45 30
Third S3 100,000.00 45 45
60,000.00 150,000.00 100,000.00
S2 7,500.00 (150,000.00) 30,000.00 67,500.00 45,000.00
S1 (67,500.00) 11,250.00 18,750.00 37,500.00
S3 (141,250.00) 70,625.00 70,625.00
- - - 156,875.00 153,125.00

Services Provided by: S1 S2 S3 P1 P2

S1 10 15 25 50
S2 5 20 45 30
S3 10 45 45
Services Provide By
Costs S1 S2 S3
S1 = 60,000.00 5 Eq 1: S1 = 60,000 + 5%S2 + 10%S3
S2 = 150,000.00 10 10 Eq 2: S2 = 150,000 + 10%S1 + 10%S3
S3 = 100,000.00 15 20 Eq 3: S3 = 100,000 + 15%S1 + 20%S2
P1 25 45 45
P2 50 30 45

Substitute Eq3 to Eq1 to form Eq4

S2 = 150,000 + 10%S1 + 10%[100,000 +15%S1 + 20%S2]
S2 = 150,000 + 10%S1 + 10,000 + 1.5%S1 + 2%S2
Eq 4 98%S2 = 160,000 + 11.5%S1

Using Eq 1 and Eq 4 to solve for S2

[5%S2 = -60,000 + S1] X 11.5% 0.00575 6900

Eq 4 98%S2 = 160,000 + 11.5%S1
(-) .575%S2 = -6,900 + 11.5%S1
97.425%S2 = 166,900
S2 = 171,311.27
Eq 1: S1 = 60,000 + 5%S2
S1 = 68,565.56
Eq 3: S3 = 100,000 + 15%S1 + 20%S2
S3 = 144,547.09

Services Provided by: S1 S2 S3 P1 P2

S1 10 15 25 50
S2 5 20 45 30
S3 10 45 45

Algebraic Ratio S1 S2 S3 P1 P2
To Allocate: 60,000.00 150,000.00 100,000.00
S1 10:15:25:50 (68,565.56) 6,856.56 10,284.83 17,141.39 34,282.78
S2 5:20:45:30 8,565.56 (171,311.27) 34,262.25 77,090.07 51,393.38
S3 0:10:45:45 - 14,454.71 (144,547.09) 65,046.19 65,046.19
0.00 - - 159,277.65 150,722.35
 75
75

90
100
90

+ 5%S2 + 10%S3
0 + 10%S1 + 10%S3
0 + 15%S1 + 20%S2
 (a) (b) (c)
Budgeted Overhead
Direct 71,000.00 71,000.00 71,000.00
Indirect 70,400.00 70,400.00 70,400.00
Total 141,400.00 141,400.00 141,400.00
Budgeted Based 6,000.00 40,000.00 10,000.00
23.57 3.54 14.14
Factory Overhead Rates
/DLHr /MHr /Unit

Actual activty - based 6,020.00 39,980.00 10,015.00

Applied Overhead 141,871.33 141,329.30 141,612.10