EXHIBIT 6-2
APPLICABILITY OF OVERHEAD ALLOCATION METHODS

Method of Assigning Overhead

Number   of Stages

Type of Allocations

Basis of Overhead Rates

When Applicable

Single Plant Wide Rate.

       1

From a single aggregated cost pool, to products.

A production volume related activity measure, e.g., direct labor hours, machine hours, etc.

Plant produces only one, or a few similar products that consume all indirect resources in the same proportions, e.g., Product X consumes 10% of each indirect resource in the plant.

Single Rate Per Department.

      2

From service departments, to producing departments' single cost pools (overhead accounts), to products.

A production volume related activity measure. These may be different for each department.

Each department produces only one, or a few similar products that consume all of a department's indirect resources in the same proportions, e.g., Product X consumes 20% of all indirect resources in Department A, 10% of all indirect resources in Department B, etc.

Multiple Activity Based Rates Per Department.

  2 or      more

From service departments, to producing departments' activity cost pools, to products.

Both production volume related and non-production volume related activity measures, e.g., number of purchase orders, number of setups, etc.

Each department produces many products that consume resources within each department in different proportions, e.g., Product X consumes 30% of the power, 15% of the engineering work and 20% of the repair in Department A. Multiple rates are needed in Department A.