Problem - Delille Company manufactures both traditional toothpaste and gel toothpaste, with each type of toothpaste produced in separate departments. Three support departments support the production departments: power, general factory, and personnel. Budgeted data on the five departments are as follows:
Support departments producing departments
Power general factory personnel traditional gel
Overhead $90,000 $300,000 $120,000 $137,500 $222,500
Machine hours --------- 1,403 1,345 8,000 24,000
Square feet 3,600 ------------ 2,400 10,000 7,200
# of employees 8 13 7 18 14
The company does not break overhead into fixed and variable components. The bases for allocation are: power-machine hours, general factory-square feet, and personnel-number of employees.
1. Allocate the overhead costs to the producing departments using the direct method. (Take allocation ratios out to four significant digits.)
2. Using machine hours, compute departmental overhead rates that producing departments use to assign overhead costs to products. (Round the overhead rates to the nearest cent.)