ACC 410 : ACC410 Solution Chapter 8
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Question 4: Service department costallocation
Inns Battery Company has two service departments: Maintenanceand Personnel. Maintenance Department costs are allocated on thebasis of budgeted maintenance-hours. Personnel Department costs areallocated based on the number of employees. Data on budgetedmaintenance-hours and number of employees are as follows:
Support Departments | Production Departments | |||
Maintenance Department | Personnel Department | A | B | |
Budgeted costs | $180,000 | $30,000 | $80,000 | $120,000 |
Budgeted maintenance-hours | n/a | 240 | 720 | 240 |
Number of employees | 20 | n/a | 60 | 120 |
Required:
4a. Using the direct method, determine the amount of supportdepartment costs to be allocated to Production Department A.
4b. Using the step-down method, determine the amount ofMaintenance Department costs to be allocated to ProductionDepartment A, if the service department with the highest percentageof interdepartmental support service is allocated first.
4c. Using the reciprocal method, determine the amount ofmaintenance department costs to be allocated to ProductionDepartment A (round up to nearest dollar).
4d. List and explain two possible reasons why a manager mightprefer that budgeted rather than actual cost-allocation rates beused when cost is being allocated to his/her department fromanother department. Use the textbook and/or other relevantresources to support your answer.
Inns Battery Company has two service departments: Maintenanceand Personnel. Maintenance Department costs are allocated on thebasis of budgeted maintenance-hours. Personnel Department costs areallocated based on the number of employees. Data on budgetedmaintenance-hours and number of employees are as follows:
Support Departments | Production Departments | |||
Maintenance Department | Personnel Department | A | B | |
Budgeted costs | $180,000 | $30,000 | $80,000 | $120,000 |
Budgeted maintenance-hours | n/a | 240 | 720 | 240 |
Number of employees | 20 | n/a | 60 | 120 |
Required:
4a. Using the direct method, determine the amount of supportdepartment costs to be allocated to Production Department A.
4b. Using the step-down method, determine the amount ofMaintenance Department costs to be allocated to ProductionDepartment A, if the service department with the highest percentageof interdepartmental support service is allocated first.
4c. Using the reciprocal method, determine the amount ofmaintenance department costs to be allocated to ProductionDepartment A (round up to nearest dollar).
4d. List and explain two possible reasons why a manager mightprefer that budgeted rather than actual cost-allocation rates beused when cost is being allocated to his/her department fromanother department. Use the textbook and/or other relevantresources to support your answer.
Fraiser company has four departments, of which assembly andfinishing are producing departments. Meanwhile, power and generalfactory are service (support) departments. The followinginformation pertains to the service (support) departments.
Power | general factory | Assembly | Finishing | |
Direct Costs | 120,000 | 80,000 | 60,000 | 100,000 |
Power | - | 20% | 30% | 50% |
General factory | 40% | - | 30% | 30% |
a) determine the total amount fo costs assigned to to theassembly and finishing departments assuming that you allocated theservice (support) department costs using the direct method(includes direct costs).
b) determine the total amount fo costs assigned to tothe assembly and finishing departments assuming that you allocatedthe service (support) department costs using the step (sequential)method ( includes diret costs). allocate general factory costsfirst.
c) give me the two equations to measure the total amount ofcosts to be allocated from the two support department using thereciprocal method.
d) what is the total costs to be allocated from the powerdepartment?
e) waht is the total costs to be allocated from the generalfactory department?