Solved: Smalley Furniture Company has two production

departments The parts department

Smalley Furniture Company has two production departments The parts department

Smalley Furniture Company has two production departments. The parts department uses
automated machinery to make parts; as a result, it uses very few employees. The assembly
department is labor intensive because workers manually assemble parts into finished furniture.
Employee fringe benefits and utility costs are the two major overhead costs of the company’s
production division. The fringe benefits and utility costs for the year are $480,000 and $240,000,
respectively.
The typical consumption patterns for the two departments follow.

The supervisor of each department receives a bonus based on how well the department
controls costs. The company’s current policy requires using a single activity base (machine
hours or labor hours) to allocate the total overhead cost of $720,000.

Required
a. Assume that you are the parts department supervisor. Choose the allocation base that would
minimize your department’s share of the total overhead cost. Calculate the amount of overhead
to allocate to both departments using the base that you selected.
b. Assume that you are the assembly department supervisor. Choose the allocation base that
would minimize your department’s share of the total overhead cost. Calculate the amount of
overhead to allocate to both departments using the base that you selected.
c. Assume that you are the plant manager and that you have the authority to change the
company’s overhead allocation policy.
Formulate an overhead allocation policy that would be fair to the supervisors of both the parts
and assembly departments. Compute the overhead allocation for each department using
yourpolicy.

Smalley Furniture Company has two production departments The parts department

ANSWER
https://solvedquest.com/smalley-furniture-company-has-two-production-departments-the-parts-
department/

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