and the step method. E14.2 (LO 2), AP The Screamin' Eagles Company makes wheels and wings for ground transport vehicles and drones. In addition to the key manufacturing departments, Screamin' Eagles needs two key support services, provided by its Maintenance and IT departments. The Maintenance costs are allocated to other departments based on the square footage of space each department occupies. The IT department allocates its costs to other departments based on the amount of time the IT employees spend assisting the other departments. The cost information of all four departments, along with their usage information for both allocation bases, is as follows. Initial cost Square feet occupied IT labor hours used Support Departments Operating Departments Wheels Wings Totals $650,000 $1,270,000 AIL Maintenance IT $125,000 $80,000 1,200 2,000 1,000 - $415,000 2,400 2,850 5,600 2,150 Required a. Allocate the support department costs using the direct method to determine the total costs for which each operating department should be accountable. 100 11,200 6,000 b. Allocate the support department costs using the step method to determine the total costs for which each operating department should be accountable. Rank the support departments based on their original cost. c. Which of the two approaches would you recommend to Screamin' Eagles management? Explain.
and the step method. E14.2 (LO 2), AP The Screamin' Eagles Company makes wheels and wings for ground transport vehicles and drones. In addition to the key manufacturing departments, Screamin' Eagles needs two key support services, provided by its Maintenance and IT departments. The Maintenance costs are allocated to other departments based on the square footage of space each department occupies. The IT department allocates its costs to other departments based on the amount of time the IT employees spend assisting the other departments. The cost information of all four departments, along with their usage information for both allocation bases, is as follows. Initial cost Square feet occupied IT labor hours used Support Departments Operating Departments Wheels Wings Totals $650,000 $1,270,000 AIL Maintenance IT $125,000 $80,000 1,200 2,000 1,000 - $415,000 2,400 2,850 5,600 2,150 Required a. Allocate the support department costs using the direct method to determine the total costs for which each operating department should be accountable. 100 11,200 6,000 b. Allocate the support department costs using the step method to determine the total costs for which each operating department should be accountable. Rank the support departments based on their original cost. c. Which of the two approaches would you recommend to Screamin' Eagles management? Explain.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:and the step method.
E14.2 (LO 2), AP The Screamin' Eagles Company makes wheels and wings for ground transport vehicles and drones. In
addition to the key manufacturing departments, Screamin' Eagles needs two key support services, provided by its
Maintenance and IT departments.
The Maintenance costs are allocated to other departments based on the square footage of space each department occupies.
The IT department allocates its costs to other departments based on the amount of time the IT employees spend assisting
the other departments. The cost information of all four departments, along with their usage information for both allocation
bases, is as follows.
Initial cost
Square feet occupied
IT labor hours used
Support Departments Operating Departments
Wheels
Wings
Totals
$650,000 $1,270,000
AIL
Maintenance IT
$125,000 $80,000
1,200 2,000
1,000
-
$415,000
2,400
2,850
5,600
2,150
Required
a. Allocate the support department costs using the direct method to determine the total costs for which each operating
department should be accountable.
100
11,200
6,000
b. Allocate the support department costs using the step method to determine the total costs for which each operating
department should be accountable. Rank the support departments based on their original cost.
c. Which of the two approaches would you recommend to Screamin' Eagles management? Explain.
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