. Compare and explain differences in the support-department costs allocated to each production department
. Compare and explain differences in the support-department costs allocated to each production department
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
2. Compare and explain differences in the support-department costs allocated to each production department.
![Problem 1
Caris Company is a manufacturer with two production departments (Machining and
Assembly) as well as two support departments (Materials Requisitions and Utility Services).
For the last quarter of 2020, Caris's cost records indicate the following:
Budgeted
overhead costs
before any inter-
department cost
allocations
Support work
supplied by MR
(Number of
requisitions)
Support work
supplied by US
(Power costs)
Materials
Requisitions
SUPPORT
(MR)
$400,000
0
10%
Utility
Services
(US)
$2,000,000 $9,456,000 $13,458,000 $25,314,000
25%
0
PRODUCTION
Machining Assembly Total
40%
30%
35%
60%
100%
100%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8a323ef2-7c7b-4121-8941-c28249cc0325%2F681c944d-faee-4148-9f53-41bce1ec6079%2Fw55qrgm_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 1
Caris Company is a manufacturer with two production departments (Machining and
Assembly) as well as two support departments (Materials Requisitions and Utility Services).
For the last quarter of 2020, Caris's cost records indicate the following:
Budgeted
overhead costs
before any inter-
department cost
allocations
Support work
supplied by MR
(Number of
requisitions)
Support work
supplied by US
(Power costs)
Materials
Requisitions
SUPPORT
(MR)
$400,000
0
10%
Utility
Services
(US)
$2,000,000 $9,456,000 $13,458,000 $25,314,000
25%
0
PRODUCTION
Machining Assembly Total
40%
30%
35%
60%
100%
100%
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Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
What approaches might be used to decide the sequence in which to allocate supportdepartments when using the step-down method?
Solution
Follow-up Question
Prepare the following
a. Direct method
b. Step-down method (allocate MR first)
c. Step-down method (allocate US first)
d. The Algebraic/reciprocal method.
Solution
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