Exercise 11-32 (Algo) Cost Allocation: Reciprocal Method (LO 11-4)Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow: Proportion of Services Used byDepartmentDirect CostsMaintenanceCafeteriaMachiningAssemblyMachining$140,000 Assembly 80,000 Maintenance 47,000 — 0.2 0.5 0.3 Cafeteria 38,000 0.8 — 0.1 0.1 Required:Use the reciprocal method to allocate the service costs. (Matrix algebra is not required.) (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)

Let maintenance be A and Cafeteria be B By refering the table above, we can form following equation…

Answered: aro Manufacturing has two production…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 11-32 (Algo) Cost Allocation: Reciprocal Method (LO 11-4)

Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow:

				Proportion of Services Used by
Department	Direct Costs	Maintenance	Cafeteria	Machining	Assembly
Machining	$	140,000
Assembly		80,000
Maintenance		47,000		—		0.2	0.5	0.3
Cafeteria		38,000		0.8		—	0.1	0.1

Required:

Use the reciprocal method to allocate the service costs. (Matrix algebra is not required.) (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)

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