Sequential Method Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:
Support Departments Producing Departments Power General Factory Purchasing Shampoo Conditioner Overhead $80,000 $314,000 $169,000 $78,800 $107,400 Square feet 3,000 — 3,000 9,600 8,400 Machine hours — 1,403 1,345 8,000 24,000 Purchase orders 20 40 7 60 120 The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders.
The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders.
The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost.
Required:
1. Allocate the overhead costs to the producing departments using the sequential method. Carry out allocation ratios to four decimal places. Use these numbers for subsequent calculations.
2. Using machine hours, compute departmental overhead rates.