Budgeted overhead costs before any inter- department cost allocations Support work supplied by MR SUPPORT Materials Utility Requisitions Services (MR) (US) $200,000 PRODUCTION Machining Assembly Total $1,000,000 $5,456,000 $7,458,000 $14,114,000 0 25% 40% 35% 100% (Number of requisitions) Support work 10% 0 30% 60% 100% supplied by US (Power costs)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Carica Company is a manufacturer with two production departments (Machining and
Assembly) as well as two support departments (Materials Requisitions and Utility Services).
For the last quarter of 2020, Carica’s cost records indicate the following:

Required:
1. Allocate the two support departments’ costs to the two operating departments using the
following methods:
a. Direct method 
b. Step-down method (allocate MR first) 
c. Step-down method (allocate US first) 
d. The Algebraic method. 

 

SUPPORT
Materials Utility
Requisitions Services
(MR)
(US)
Budgeted
overhead costs
$200,000
before any inter-
department cost
allocations
Support work
supplied by MR
PRODUCTION
Machining Assembly Total
$1,000,000 $5,456,000 $7,458,000 $14,114,000
0
25%
40%
35%
100%
(Number of
requisitions)
Support work
10%
0
30%
60%
100%
supplied by US
(Power costs)
Transcribed Image Text:SUPPORT Materials Utility Requisitions Services (MR) (US) Budgeted overhead costs $200,000 before any inter- department cost allocations Support work supplied by MR PRODUCTION Machining Assembly Total $1,000,000 $5,456,000 $7,458,000 $14,114,000 0 25% 40% 35% 100% (Number of requisitions) Support work 10% 0 30% 60% 100% supplied by US (Power costs)
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