Chapter 4B – Review Questions For the following question(s) refer to the information below. The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments such as Quality Control and Maintenance to the product departments. To aid them in this discussion, the controller has provided the following information: (Numbers in Thousands) Quality Control Maint. Mach. Assem. Total Budgeted overhead costs before allocation: $350 $200 $400 $300 $1,250 Budgeted machine hours: -- -- 50 -- 50 Budgeted direct labor hours: 25 25 Budgeted hours of service: Quality Control: 5 7 21 7 40 Maintenance: 10 5 18 12 45 1 If Rochester Manufacturing uses the direct method of allocating service department costs, the total service costs allocated to the assembly department would be: A. $ 80,000 B. $ 87,500 C. $120,000 D. $167,500 E $467,500 2 Using the direct method, the total amount of overhead allocated by the Machining Department to each machine hour at Rochester Manufacturing would be A. $ 2.40 B. $ 5.25 C. $ 8.00 D. $ 9.35 E. $15.653 If Rochester Manufacturing uses the step-down (step) method of allocating service costs beginning with the wrong department(using the percentage method), the maintenance costs allocated to the assembly department would be A. $210,000 B. $200,000 C. $162,000 D. $108,000 E. $ 70,000 4 If Rochester Manufacturing uses the reciprocal (simultaneous) method of allocating service costs, the total amount of quality control costs (rounded to the nearest dollar) to be allocated to the other departments would be A. $469,473 B. $421,053 C. $350,000 D. $336,842 E.
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