Question - The Deadlock Cooperative Bank is considering either a bank wide overhead rate or departmental overhead rates to allocate $2,000,000 of indirect costs. The bank wide rate would be based on either direct labor hours or the number of loans processed. The departmental rates would be based on direct labor time for Consumer Loans and a dual rate based on direct labor time and the number of loans processed for Commercial Loans. The following information was gathered for the upcoming period:
Department DLH LP DC
Consumer 12,000 1,600 $400,000
Commercial 8,000 400 $300,000
Direct labor hours=DLH
Loans processed=LP
Direct costs=DC
If Deadlock Cooperative uses a bank-wide rate based on direct labor time, what would be the indirect costs allocated to the Consumer Department?
a. $800,000
b. $1,200,000
c. $1,600,000
d. $400,000
If Deadlock Cooperative uses a bank wide rate based on the number of loans processed, what would be the indirect costs assigned to the Commercial Department?
a. $400,000
b. $600,000
c. $800,000
d. $200,000