The Plenty Almond Company operated with three producing departments Cutting, Dividing, and Shelling Which are serviced by two service departments.Equipment Maintenance and General Plant. Costs are allocated first from General Plant. Costs are allocated first from General Plant to the other departments on the basis of square footage; then Equipment Maintenance costs are allocated to the producing departments on the basis of direct labor hours. Relevant August data are:
- Producing Departments Service Departments
- Equipment General
- Cutting Dividing Shelling Maintenance Plant
- Overhead before allocation of
- Service department costs $60,000 $ 45,500 $47,000 $21,000 $30,000
- Square Footage 8,000 12,000 6,000 4,000 4,000
- Machine hours used 1,200 400 1,400 ---- ----
- Direct labor hours 7,000 9,000 12,000 ---- ----
Required:
The allocation of service department costs to producing departments and the rate per direct labor hour for applying overhead in each producing department.
A. How is the cost of reworking defective items recorded?
B. Discuss the accounting treatment of spoilage in a job order system.
C. Discuss how spoilage is treated in equivalent unit computations.