net present value, overhead rate and allocation of costs
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(Ignore income taxes in this problem.) The following data concern an investment project:
The working capital will be released for use elsewhere at the conclusion of the project.
Required:
Compute the project's net present value.
Spivey Company has two service departments and two operating departments. Budgeted costs and budgeted activity in the various departments for the current year are shown below:
The company uses the step method to allocate service department costs to operating departments. The costs of Service Department A are allocated first on the basis of square feet of space occupied. The costs of Service Department B are then allocated on the basis of number of employees in other departments. Predetermined overhead rates in the operating departments are based on machine hours.
Required:
a. Prepare a schedule showing the allocation of service department costs to other departments.
b. Compute the predetermined overhead rate for each operating department.
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Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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