Reference no: EM132808919

Keith, the intern, was given some information from his supervisor. The supervisor wants him to figure out how well her department is doing. Keith suggests using Return On Investment as a gauge. The figures include: Sales of $250 000, Net Operating Income of $30 000, Average Operating Assets of $200 000, and the company's required return is 12%.

Problem 1: Using the Direct Method, what is the total overhead cost after allocation for the Production department?

Option 1: $315 000

Option 2: $195 000

Option 3: $155 000

Option 4: $165 000

Problem 2: Using the Step Method, determine the amount of overhead that will be allocated from the Custodial Department (the amount of overhead from Custodial that will be allocated to other departments). Round to the nearest dollar.

Option 1: $131 818

Option 2: $104 545

Option 3: $63 636

Option 4: None of the Above