Anchor Company manufactures a variety of tool boxes. They have two operating divisions – Corporate Sales and Consumer Sales – and two support divisions –Admin and IT. Each operating division operates independently. Anchor uses the number of employees to allocate Admin costs and computer processing time to allocate IT costs. The following data are available for the month: SUPPORT DEPT OPERATING DEPT Admin IT Corp Sales Cons. Sales Budgeted costs before interdivision allocations $170,000 $400,000 $2,000,000 $1,000,000 Admin budgeted # of employees 40 80 70 IT budgeted # of processing time (in minutes) 600 4,000 3,400
Question V – Allocate Costs with Reciprocal Method (8 Marks)
Anchor Company manufactures a variety of tool boxes. They have two operating divisions – Corporate Sales and Consumer Sales – and two support divisions –Admin and IT. Each operating division operates independently. Anchor uses the number of employees to allocate Admin costs and computer processing time to allocate IT costs. The following data are available for the month:
|
SUPPORT DEPT |
OPERATING DEPT |
|||
|
|
Admin |
IT |
Corp Sales |
Cons. Sales |
|
Budgeted costs before interdivision allocations |
|
|
|
|
|
|
$170,000 |
$400,000 |
$2,000,000 |
$1,000,000 |
|
Admin budgeted # of employees |
|
|
|
|
|
|
|
40 |
80 |
70 |
|
IT budgeted # of processing time |
|
|
|
|
|
(in minutes) |
600 |
|
4,000 |
3,400 |
REQUIRED:
Using the reciprocal method, allocate the support department costs.
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