Please solve this with all steps shown Celestial Artistry Co

Please solve this with all steps shown

Celestial Artistry Company is developing departmental overhead rates based on direct-labor hours for its two production departments, Etching and Finishing. The Etching Department employs 20 people and the Finishing Department employs 80 people. Each person in these two departments works 2,000 hours per year. The production-related overhead costs for the Etching Department are budgeted at $200,000, and the Finishing Department costs are budgeted at $320,000. Two service departments, Maintenance and Computing, directly support the two production departments. These service departments have budgeted costs of $48,000 and $250,000, respectively. The production departments’ overhead rates cannot be determined until the service departments’ costs are allocated. The following schedule reflects the use of the Maintenance Department’s and Computing Department’s output by the various departments.

1-a. Use the direct method to allocate service department costs.

1-b. Calculate the overhead rates per direct-labor hour for the Etching Department and the Finishing Department.

	Using Department
Service Department	Maintenance		Computing		Etching		Finishing
Maintenance (maintenance hours)	0			1,000			1,000			8,000
Computing (minutes)	240,000			0			840,000			120,000

Solution

Working Notes :

Production departments

Production departments

Etching

Finishing

Maintenance

Computing

A

persons

20

80

B

Hours worked per person in year

2000

2000

Total labour hours(A X B )

40000

160000

overhead costs

$                                       2,00,000

$              3,20,000

$            48,000

$           2,50,000

Allocation of service departments costs

Service department

Basis

Overhead costs

Etching

Finishing

Maintenance(A)

Maintenance hours(only production departments)

(48000 x 1000/9000)

(48000 x 8000/9000)

$                              5,333.33

$                            42,666.67

Computing(B)

Minutes(only production departments)

(250000 x 840000/960000)

(250000*120000/960000)

$                        2,18,750.00

$                            31,250.00

Total (A+B)

$                        2,24,083.33

$                            73,916.67

1.b.ans

Overhead rates per direct labour hour

Particulars

Production departments

Overhead cost (direct cost)(A)

$                              2,00,000

$                              3,20,000

Overhead cost (allocated from service departments)(B)

$                        2,24,083.33

$                            73,916.67

Total overhead costs(A+B)= C

$                        4,24,083.33

$                        3,93,916.67

Total Labour hours=D

40000

160000

Overhead rate per direct labour hour(E=C/D)

$                                    10.60

$                                      2.46

		Production departments	Production departments
		Etching	Finishing	Maintenance	Computing
A	persons	20	80
B	Hours worked per person in year	2000	2000
	Total labour hours(A X B )	40000	160000
	overhead costs	$                                       2,00,000	$              3,20,000	$            48,000	$           2,50,000