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Problem 4-8

1) The document provides overhead cost data for 5 departments (H, G, U, V, W) of Ippolito Ink Company for year 19X0. 2) It asks to allocate the total costs of service departments U, V, W to production departments H and G using direct, step, and algebraic methods. 3) The overhead application rates are then to be calculated for departments H and G using direct labor hours of 100,000 and 195,000 respectively.

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Indra Budi Setiyawan
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1K views

Problem 4-8

1) The document provides overhead cost data for 5 departments (H, G, U, V, W) of Ippolito Ink Company for year 19X0. 2) It asks to allocate the total costs of service departments U, V, W to production departments H and G using direct, step, and algebraic methods. 3) The overhead application rates are then to be calculated for departments H and G using direct labor hours of 100,000 and 195,000 respectively.

Uploaded by

Indra Budi Setiyawan
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Nama : Indra Budi Setiyawan

NIM : A31115023

Akuntansi Biaya

PROBLEM 4-8 DIRECT, STEP, AND ALGEBRAIC METHODS

The Ippolito Ink Company prepared the following list in order to determine the factory
overhead in each department for the year 19X0:

Factory overhead cost, Total cost, service


production departement departments
H G U V W
Rent $25.000,00 $77.000 $1.500 $1.450 $700
Repair 10.000 12.050 2.300 3.000 750
Fuel 35.000 42.000 950 700 600
Indirect labor 15.750 17.000 14.500 10.000 9.750
Indirect materials 6.100 5.650 12.700 9.450 6.000
Heat and light 20.250 15.120 900 600 750
Depreciation 9.400 7.130 300 150 175
Miscellaneous 6.000 5.050 70 60 50
Total $127.500 $181.000 $33.220 $25.410 $18.775

Additional data needed for allocation of factory overhead:

Departement U services G, V, dan W in the ratio of 2:1:1, respectively

Department V service Departments H, G, U and W in the ratio of 4:3:2:1, repectively

Department W service Department H dan G in the ratio of 3:1, respectively

Required: Assume Department U is allocated first, V is second, and W is last.

a. Allocate the total costs of the service departments to the producing department by
using the following methods:
1. Direct
2. Step
3. Algebraic
b. Determine the factory overhead application rates for the production departments using
the following bases: Department H, 100,000 direct labor hours: and department G,
195,000 direct labor hours.

Answer :
a. Allocate the total costs of the service departments to the producing department by using
the following methods:
1. Derict Method

COMPUTATIONS

Cost Department H $ 127.500 $ 127.500


X 100%= X 100%= X 100%=41,33
Cost producing Department $ 127.500$ 181.000 $ 308.500

Cost Department G $ 181.000


X 100%= X 100%= 58,67%
Cost producing Department $ 308.500

1. $ 33.220 x 41,33%= $ 13.729,83


2. $ 33.220 x 58,67%= $ 19.490,17
3. $ 25.410 x 41,33%= $ 10.501,95
4. $ 25.410 x 58,67%= $ 14.908,05
5. $ 18.775 x 41,33%= $ 7.759,71
6. $ 18.775 x 58,67%= $ 11.015,29

2. Step Method

COMPUTATIONS
Allocated U

Cost V $ 25.410
1) X Cost U= X $ 33.220=$ 2.395,16
Cost V +W + H +G $ 352.685

Cost V $ 18.775
2) X Cost U= X $ 33.220=$ 1.768,45
Cost V +W + H +G $ 352.685

Cost V $ 127.500
3) X Cost U= X $ 33.220=$ 12.009,45
Cost V +W + H +G $ 352.685

Cost V $ 181.000
4) X Cost U= X $ 33.220=$ 17.048,70
Cost V +W + H +G $ 352.685

Allocated V =

Cost W $ 18.775
5) X Cost subtotal V = X $ 27.805,16=$ 1.595,12
Cost W + H+ G $ 327.275
Cost W $ 127.500
6) X Cost subtotal V = X $ 27.805,16=$ 10.832,36
Cost W + H+ G $ 181.000
Cost W $ 18.775
7) X Cost subtotal V = X $ 27.805,16=$ 15.377,68
Cost W + H+ G $ 327.275

Allocated W

Cost W $ 127.500
1) X Cost subtotal W = X $ 22.138,57=$ 9.149,65
Cost W + H+ G $ 308.500
Cost W $ 181.000
2) X Cost subtotal W = X $ 22.138,57=$ 12.988,92
Cost W + H+ G $ 308.500

3. Algebraic Method

Department V
v = 25.410 + 0,25U
v = 25.410 + 0,25 (40.318)
v = 25.410 + 10.080
v = 35.490

Department W
w = 18.775 + 0,25 (40.318) + 0,1(35.490)
w = 18.775 + 10.080 + 3.549
w = 32.404

 Department U = 33.225 + 0,2V


 Department V = 25.410 + 0,25U
 Department W = 18.775 + 0,25U + 0,1V

Subtitusi :
U = 33.220 + 0,2V
U = 33.200 + 0,2(25.410+0,25U)
U = 33.220 + 5.082 + 0,05U
U – 0,05 U = 38.302
0,95 U = 38.302
U = 38.302
0,95
U = 40.317

b. Factory Overhead application rates

1. Direct
For Department H = $ 127.500 ÷ 100.000 = 1,27
For Department G = $ 181.000 ÷ 195.000 = 0,93
2. Step
For Department H = $ 159.491,46 ÷ 100.000 = 1,59
For Department G = $ 227.171,30 ÷ 195.000 = 1,65

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