Problem 4-25A (Algo) Fairness and cost pool allocations LO 4-1, 4-2, 4-3, 4-5 Perez Manufacturing Company uses two departments to make its products. Department I is a cutting department that is...

Extracted text: Problem 4-25A (Algo) Fairness and cost pool allocations LO 4-1, 4-2, 4-3, 4-5 Perez Manufacturing Company uses two departments to make its products. Department I is a cutting department that is machine intensive and uses very few employees. Machines cut and form parts and then place the finished parts on a conveyor belt that carries them to Department II, where they are assembled into finished goods. The assembly department is labor intensive and requires many workers to assemble parts into finished goods. The company's manufacturing facility incurs two significant overhead costs: employee fringe benefits and utility costs. The annual costs of fringe benefits are $292,000 and utility costs are $220,000. The typical consumption patterns for the two departments are as follows: Department I 15,000 6,000 Total Machine hours used Direct labor hours used Department II 5,000 10,000 20,000 16,000 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 allocation base (machine hours or labor hours) to allocate the total overhead cost of $512,000. Required a. Assume that you are the supervisor of Department I. Choose the allocation base that would minimize your department's share of the total overhead cost. Calculate the amount of overhead that would be allocated to both departments using the base that you selected. b. Assume that you are the supervisor of Department II. Choose the allocation base that would minimize your department's share of the total overhead cost. culate the amount overhead that would be ted departments using the that you selected. c. Assume that you are the plant manager and 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 Department I and Department II. Compute the overhead allocations for each department using your policy. O Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Assume that you are the plant manager and 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 Department I and Department II. Compute the overhead allocations for each department using your policy. (Do not round intermediate calculations.) Department Department II Costs Fringe benefits $ 274,500 X $ 237,500 X Utility 292,000 X 220,000 x Total $ 566,500 $ 457,500 < required="" b="" required="" c="">