Question

Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded:

Melting Department direct overhead $110,000
Molding Department direct overhead 400,000
General plant management 100,000
Plant security 50,000

Other pertinent data follow:

Melting Molding
Number of employees 35 40
Space occupied (square feet) 10,000 20,000
Machine hours 10,000 2,000
Direct labor hours 4,000 20,000

Required:
a. Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments.
b. Determine the total departmental overhead costs for the Melting and Molding Departments.

Answer 1

a.

General Plant Management Costs

Cost is $100,000

These costs are allocated on the basis of number of production employees.

Melting Department employs 35 workers and Molding employs 40 for a total of 75.

Melting Department =
`(35)/(75) * 100,000`

Melting Department = $46,666,67

Molding Department =
`(40)/(75) * 100,000`

Molding Department = $53,333.33

Plant Security Costs

Cost is $50,000

These costs are allocated on the basis of space occupied by the production departments.

Melting Department occupies 10,000ft² and Molding occupies 20,000 ft² for a total of 30,000 ft²

Melting Department =
`(10,000)/(30,000) * 50,000`

Melting Department = $16,666,67

Molding Department =
`(20,000)/(30,000) * 50,000`

Molding Department = $33,333.33

2. Melting Department

= 110.000 + 46,666.67 + 16,666.67

= $173,333.34

Molding Department

= 400,000 + 53,333.33 + 33,333.33

= $486,666.66