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FINANCIAL ACCOUNTING
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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Elm Co has two service departments serving two production departments. Overhead costs apportioned to each department are as follows. Production 1 Production 2 Service 1 Service 2 97,428 84,947 9,384 15,823 Service 1 department is expected to work a total of 40,000 hours for the other departments, divided as follows. Hours Production 1 Production 2 Service 2 20,000 15,000 5,000 Service 2 department is expected to work a total of 12,000 hours for the other departments, divided as follows. Production 1 Production 2 Service 1 Hours 3,000 8,000 1,000 Required The finance director has asked you to reapportion the costs of the two service departments using the direct method of apportionment. When you show the finance director how you have reapportioned the costs of the two service departments, they say 'Did I say that we used the direct method? Well, I meant to say the step down method. Required Prove to the finance director that you know how to use the step down method. (Note. Apportion the overheads of Service 1 department first.)
Transcribed Image Text:Elm Co has two service departments serving two production departments. Overhead costs apportioned to each department are as follows. Production 1 Production 2 Service 1 Service 2 97,428 84,947 9,384 15,823 Service 1 department is expected to work a total of 40,000 hours for the other departments, divided as follows. Hours Production 1 Production 2 Service 2 20,000 15,000 5,000 Service 2 department is expected to work a total of 12,000 hours for the other departments, divided as follows. Production 1 Production 2 Service 1 Hours 3,000 8,000 1,000 Required The finance director has asked you to reapportion the costs of the two service departments using the direct method of apportionment. When you show the finance director how you have reapportioned the costs of the two service departments, they say 'Did I say that we used the direct method? Well, I meant to say the step down method. Required Prove to the finance director that you know how to use the step down method. (Note. Apportion the overheads of Service 1 department first.)
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