Radz Company has two support departments (Administration and Janitorial) and three producing departments (Fabricating, Assembly, and Finishing). Costs and activities are as follows:
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Radz Company has two support departments (Administration and Janitorial) and three producing departments (Fabricating, Assembly, and Finishing). Costs and activities are as follows:
| Administration | Janitorial | Fabricating | Assembly | Finishing | |
| direct cost | $60000 | $55000 | $40000 | $50000 | $25000 |
| number of employees | 10 | 30 | 40 | 20 | |
| square feet | 2000 | 1000 | 28000 | 15000 | |
| direct labour hours | 5000 | 6000 | 1000 | ||
| machine hours | 1000 | 2000 | 5000 |
Administrative services are allocated based on the number of employees; janitorial services are allocated based on square footage.
| Fabricating | Assembly | Finishing | |
| direct labor hours | 10 | 8 | 2 |
| machine hours | 4 | 3 | 8 |
Required1.
Using the direct method:
a. Allocate the support department costs to production departments.
b. Calculate predetermined plantwide overhead rate of the production departments basedon direct labour hours
c. Estimate the overhead cost of job QW8
Using the reciprocal services method:
a. Allocate the support department costs to production departments.
b. Calculate predetermined departmental overhead rate of the production departments.
c. Estimate the overhead cost of job QW8
Should Radz company use a plantwide rate or departmental rates to assign overhead costs toproducts? Which method of support department cost allocation results in most accurate resultsof product costs? Explain your answer
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