PracQuiz_SpportJoint.BraulioF
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Industrial Engineering
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Jan 9, 2024
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Support Department and Joint Cost Allocation
Practice Quiz
Support Department Cost Allocation
Johnson Company produced chemical products.
Janitorial and maintenance support
department costs are allocated to the mixing and blending production departments based on
square footage (janitorial) and machine hours (maintenance), respectively.
Relevant
department data is as follows:
Janitorial
Maintenance
Mixing
Blending
Department Cost
$18,000
$12,000
$52,000
$63,000
Square footage
1,000
3,000
Machine Hours
500
1,000
1.
Using the direct method of support department cost allocation, determine the total cost
of the Mixing and Blending departments after allocating all support costs to the
production departments.
2.
Why are the support department costs allocated to the production departments?
What
is the relationship of this portion of the chapter to the last chapter?
3.
Provide an example of a support department and how its costs might be allocated.
Try
to identify an example that has not already been given by another student.
Joint Cost Allocation
Anderson Company makes three types of paint products: base, primer and paint.
All products
go through a joint mixing process which produces 8,000 gallons of base, 6,000 gallons of primer
and 4,000 gallons of paint at a joint cost of $10,000.
In addition, the mixing process for primer
is two times longer than for base, and the mixing process for paint is three times longer than for
base.
1.
Allocate the joint cost of production of $10,000 to each product using the weighted
average method.
2.
Assuming the market price at the split of point for base is $3 per gallon, primer is $4 per
gallon and paint is $8 per gallon, use the market value at split-off to allocate the $10,000
of joint production costs.
3.
Analyze the differences in the methods used in #1 and #2 above.
What are the reasons
for the difference?
When would each method be most appropriate to use?
Give an
example of two products which might use each method above.
1-
When products are split off, there is a difference in the ratio of mixing process time
to market price. There is thus diversity.
2-
Market Price Method is the most suitable to employ if you want to sell at the break
off. However, the Weighted Average Method should be used if you do not want to
sell at split off.
Mixing
Blending
Total
Department Cost ( A )
52,000
63,000
115,000
Square Footage
1,000
3,000
4,000
Machine Hours
500
1,000
1,500
Support Dept Cost Allocation
Janitorial
4,500
13,500
18,000
Maintenance
4,000
8,000
12,000
Total ( B )
8,500
21,500
30,000
Total Cost ( A + B )
60,500
84,500
145,000
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