Question

Calculating Departmental Overhead - Bates Buying-Pout-Relocation Costs:

Giver Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.

Please provide the necessary information or specific calculations you would like to know regarding departmental overhead costs, and I will assist you accordingly.

Answer 1

Calculating departmental overhead costs involves understanding that overhead costs spread over more units result in a lower average fixed cost per unit, as illustrated by a downward-sloping hyperbola on the average fixed cost curve.

Step-by-step explanation:

The student is inquiring about how to calculate departmental overhead costs within a company that has both support and producing departments. Overhead costs, also known as fixed costs, are expenses that do not vary with the quantity of output produced. When fixed costs are divided by the quantity of output, we obtain the average fixed cost. If we assume a fixed cost of $1,000, the average fixed cost curve will be a hyperbola that slopes downward as production increases, reflecting the concept of spreading the overhead. This means that as more units are produced, the fixed cost allocated to each unit decreases, making each unit less expensive in terms of the overhead contribution. Therefore, the more output the company produces, the more it can spread its fixed costs over a larger number of units, lowering the average fixed cost per unit.