Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Sourcing Departments Sourcing Operations Assembly Finishing Total Sourcing Operations The costs incurred in the plant are as follows: Total Labor Hours Used by Departments Assembly Operations 20,000 40,000 60,000 10,000 Departmental Costs $ 183,000 235,000 422,000 267,000 $ 1,107,000 Finishing 60,000 50,000 Required: 1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method? 2. What are the total costs in the production departments after allocation? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) a. Direct Method Assembly Finishing b. Step Method Assembly Finishing c. Reciprocal Method Assembly Finishing Total Service Department Cost Allocated Total Production Cost
Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments. Sourcing Departments Sourcing Operations Assembly Finishing Total Sourcing Operations The costs incurred in the plant are as follows: Total Labor Hours Used by Departments Assembly Operations 20,000 40,000 60,000 10,000 Departmental Costs $ 183,000 235,000 422,000 267,000 $ 1,107,000 Finishing 60,000 50,000 Required: 1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method? 2. What are the total costs in the production departments after allocation? (For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.) a. Direct Method Assembly Finishing b. Step Method Assembly Finishing c. Reciprocal Method Assembly Finishing Total Service Department Cost Allocated Total Production Cost
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Logan Products has two production departments-assembly and finishing. These are supported by two service departments-sourcing
(purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has
the following labor hours devoted by each of the service departments to the other departments.
Sourcing
Departments
Sourcing
Operations
Assembly
Finishing
Total
Sourcing
Operations
The costs incurred in the plant are as follows:
Total Labor Hours Used by Departments
Assembly
Operations
20,000
40,000
60,000
10,000
Departmental
Costs
$ 183,000
235,000
422,000
267,000
$ 1,107,000
Finishing
60,000
50,000
Required:
1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing
department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method?
2. What are the total costs in the production departments after allocation?
(For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)
Transcribed Image Text:a. Direct Method
Assembly
Finishing
b. Step Method
Assembly
Finishing
c. Reciprocal Method
Assembly
Finishing
Total Service
Department Cost
Allocated
Total Production
Cost
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