This paper circulates around the core theme of Compute the predetermined overhead allocation rates for each operating department. Using the rates computed in #1 above assign the overhead costs to Job L123 and L342. together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
Chomyn Corporation provides a variety of research services to a diverse range of clients. The company
has three support departments and two operating departments whose cost details for a typical quarter
are presented below.
Support Departments
Information Systems
Administration
Legal
Operating Departments
Research
Preparation
$ 268,000
347,000
192,000
822,000
590,000
$2,219,000
The existing cost allocation system is designed as follows:
(1) Support department costs are allocated to the two operating departments, and
(2) Operating department costs are then allocated to individual jobs
The support department costs are allocated to the Research and preparation departments as follows:
(1) Information Systems Department costs are allocated using a 60:40 ratio,
(2) Administration Department costs are allocated using a 30:70 ratio, and
(3) Legal Department costs are allocated using a 50:50 ratio
The company computes separate pre-determined overhead allocation rates for each operating
department using the professional labour hours in each department as the allocation base. The
Research and Preparation departments estimated 9,000 and 7,500 professional labour hours,
respectively, for the quarter.
4
Required
1. Compute the predetermined overhead allocation rates for each operating department.
2. Using the rates computed in #1 above assign the overhead costs to Job L123 and L342. The two
jobs consumed:
? 340 and 480 research professional labour hours respectively, and
? 600 and 750 preparation professional labour hours respectively
3. You have recently learnt about activity-based costing and decide to use five activity cost pools,
one for each department. The additional information you have collected is as follows:
Activity cost pool Cost driver (Allocation base) Quantity of allocation base
Information Systems
Administration
Legal
Research
Preparation
IS time
Number of consultants
Sales value
Professional labour hours
Professional labour hours
14,970 hours
40
$8,000,000
9,000 hours
7,500 hours
Compute the pre-determined allocation rates for each activity cost pool.
4. In addition to the professional research and preparation labour hours specified in #2 for jobs
L123 and L342, they consume the following additional resources:
Resource Job L123 Job L342
IS time
Number of consultants
Sales value
350
2
$1,350,000
150
2
$900,000
Using the allocated rates computed in #3 above assign the overhead costs to the two jobs.
5. Assume that the professional labour in the Research and Preparation departments are paid at
the rate of $32 and $28, respectively, per hour. Assume also that jobs L123 and L342 consumed
other direct resources worth $24,250 and $9,860, respectively. Compute the TOTAL COST of
each job. Prepare the appropriate journal entry to record the completion of the jobs (use Cost
of Jobs Completed instead of Finished Goods as the account name).
